Bulletin 2/09 English

The Credit Suisse Magazine Since 1895 Issue 2 May/June 2009 International Edition

Silence Deafness How Leonie Found Her Way out of Silence Music Composing Pieces of Music out of Total Silence

Hans-Ulrich Doerig Interview With the Chairman Emergency Aid Report From China’s Earthquake Zone Renewable Energies An Upturn Ahead in 2010? Hernando de Soto Fighting for the Rights of the Poor

Editorial 3

In the eye of the hurricane, silence reigns. Not that I have ever been close to the center of a whirlwind – or worse still – been run down by one. But the mere idea that there should be silence right in the middle of so much destructive power is one that I find fascinating. Many would no doubt wish themselves in the supposedly silent eye of the current global financial crisis. Yet, who could be sure that it isn’t just the calm before the (next) storm, to use another idiom?

This brings us to the fundamental question of how we were to approach this issue’s special topic: silence. To avoid any risk of losing finer shades of meaning in translation, we have deliberately restricted ourselves to a consideration of the concept of acoustic silence. Not least because the idea of presenting such a concept in visual form was one we found appealing. How is it possible to reconcile silence with the purely look-and-feel experience of a magazine?

For me, however, it is ultimately the pictures taken by Katharina Lütscher of the young girl Leonie, who suffers from deafness, as well as the photo reportage by Andrei Liankevich that bring the essence of the topic home without any need for words. They impressively reflect silence in all its human facets. The photos by Liankevich of the abandoned village of Kuzhbej in the Carpathians are almost poetic in nature. They record what remains when human life withdraws from what was once a lively settlement and, apart from memories – often expressed loudly – leaves behind merely silence.

And talking about humans, it is surprising to learn that in a world that is becoming ever louder, our initial image of silence in the eye of the hurricane is not one that can be replicated in people. The latest techniques in sound measurement have shown that when a Tibetan monk meditates, a veritable hurricane is unleashed by his brain waves. But read on and see for yourself, and let the silent pictures speak to you! Daniel Huber, Bulletin Editor-in-Chief

Gold Winner

1st Place Photo: Cédric Widmer Cédric Photo: Ü EEKUNST NEUE FÜR HALLEN

Mario Merz, Vento preistorico dalle montagne gelate, Hallen für neue Kunst, Schaffhausen, Photo: Raussmüller Collection «If you are really interested in seeing work of the highest calibre, very well presented, then it is necessary to visit Schaffhausen» (The New York Times)

Credit Suisse 29 _ News On the resignation of the Chairman of 10 the Board of Directors, Walter B. Kielholz 30 _ Hans-Ulrich Doerig Interview with the new Chairman on the crisis and his objectives 32 _ News Mexican presence expanded – Euro- money Award – Asian Investment Conference 34 _ Culture Tracey Emin in Berne, John M Arm- leder in Lugano, Ruben Drole in Zurich 40 _ Crisis How people react differently to crises in various cultures 41 _ Education I Private schools, an essential feature of Switzerland’s education landscape 42_ Credit Suisse Collection Swiss artists displayed at the renovated Lugano branch 43_ News Corporate Philanthropy Day – Swisscontact – Client foundations 44 _ Disaster Relief Report from the earthquake zone in the Chinese province of Sichuan 48 _ Education II Promoting talent within Credit Suisse as part of the Next Generation Network 49 _ Education III Better educational opportunities thanks to improved nutrition in Indonesia Cover photo: Katharina Lütscher | Photo: Andrei Liankevich, Altemus

Silence Photographer Andrei Liankevich visited two Economy sisters in an otherwise abandoned village in the Carpathian 50 _ Renewable Energies 6HFWRUPD\EHQHƟW mountains of Ukraine and in some impressive pictures from economic stimulus programs as of 2010 captured life in a village of silence. 53_ Overhaul of the Global Economy Global crisis creates both risks and opportunities 6 _ Sounded Composer John Cage brought silence to the 54 _ Africa The continent’s long-term prospects remain good despite current slowdown FRQFHUWKDOOIRUWKHƟUVWWLPHLQ1952 with his work 4’ 33’’. 56 _ Tackling Poverty Private sector initiatives 10 _ Silenced On a photographic visit to Kuzhbej, an and promotion of entrepreneurship are crucial abandoned village in the Ukrainian Carpathians. 58 _ Media Sector *OREDOƟQDQFLDOFULVLV increases the pressure for structural change 17 _ Escaped How Leonie found her way out of silence thanks to the latest technology – cochlear implants. Leader 22 _ Found People need their inner silence – interview with 62 _ Hernando de Soto The Peruvian economist Jesuit and Zen Master Niklaus Brantschen. ƟJKWVIRUWKHULJKWVRIWKHSRRU 25 _ Analyzed Silence is not just nothing, but the harmony of high-frequency oscillations. Service 42 _ Masthead 61 _ Good to Know

The Forest Stewardship Council (FSC) sets the standard for environmentally and socially responsible forest management. Swiss paper (Z offset, with 30 % FSC component), from European pulp, produced by Ziegler Papier AG, Grellingen (ISO 14001-FHUWLƟHd). Your link to our know-how: www.credit-suisse.com/infocus 6 Silence Music

4’ 33’’

Composed Silence

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The composer John Cage makes silence into music.

And even now, 30 years later, they haven’t forgotten, they’re still upset.” The piece made Cage world-famous. 4’ 33’’ has been performed innumerable times since its inception, recorded on vinyl and CD, even using different combinations of instruments! It has also been an inspiration to many musicians and artists. In 2002, the estate of John Cage even charged British composer Mike Batt with plagiarism for his piece “A Minute’s Silence.” The suit was settled “The place of the spirit, there where it can unfold its wings, out of court, with Batt said to have paid a six-figure sum. Batt claimed is silence,” wrote French author Antoine de Saint-Exupéry. his piece was a much better version of silence than Cage’s: “I man- And this is an experience that is especially to be encountered aged to say in one minute what it took Cage 4 minutes and 33 sec- in music. An essay on the music of the 20th and 21st cen- onds to say.” He told the British newspaper The Independent that turies – in search of the most beautiful expressions of com- his silence was original and that he hadn’t copied it from Cage. In posed silence. 2004, the piece was finally performed live by a large orchestra and broadcast by BBC Radio 3 to tumultuous applause. Cage had evi- dently changed the world with his interpretation of silence.

Inspired by Inner Sounds Text: Ingo Petz What possessed the American composer to come up with such a It was 1952 when the avant-garde composer John Cage dared to piece? Was it meant to be a joke? Or could he even have been crazy? present his experiment. Inspired among other things by Robert What was probably the most radical composition in the history of Rauschenberg’s “White Paintings,” the 40-year-old musician com- music had its roots in an experience of Cage back in the 1940s. posed a work with the obscure title 4’ 33’’, in reference to its dura- Cage, who was at the time very interested in Zen Buddhism, entered tion of 4 minutes and 33 seconds. Cage didn’t use normal staff an echo-free chamber at Harvard University. He expected to hear notation for these three short movements; instead, he gave the nothing. But, as he later remarked, he actually heard two sounds, a simple instruction “tacet”: silence. The work’s debut at Woodstock, high and a low one. “When I described them to the engineer in charge, New York, on August 29, 1952, caused a scandal. The young pianist he informed me that the high one was my nervous system in oper- David Tudor came on stage, bowed, sat at the grand piano, and in- ation, the low one my blood in circulation.” Cage wrote: “Until I die dicated the beginning and end of each movement by opening and there will be sounds. And they will continue following my death. One closing the keyboard lid. In between, there were silence, whispers, need not fear about the future of music.” rustling sounds and the animated buzz of the audience attending Cage realized that true silence does not exist, and concluded that the benefit concert for the Artists Welfare Fund. They were used every sound could be music with the appropriate setting, structure to Cage’s unconventional experiments, but felt provoked to the limit and concept, so that the listeners could fill it with their own notions, by this radical work. “People started whispering, and some even left fantasies, associations and ultimately meaning and experience. the room,” Cage would later recount. “They didn’t laugh. They were Cage’s piece was therefore viewed as the beginning of “noise music,”

Photo: Christopher Felver, Corbis Felver, Christopher Photo: simply irritated when they realized that nothing was going to happen. a style that works with deliberate sounds, random interference >

Credit Suisse Bulletin 2/09 8 Silence Music

Top left Avant-garde composer John Cage surprised his audience in January 1961 with a performance with a toy piano. Top right John Cage working with David Tudor at the Royal Festival Hall in London in May 1972. Below left John Cage experimenting in the sound studio in 1970. Below right A visitor fascinated by the “Cage organ,” which is in the St. Burchardi church in the city of Halberstadt in eastern Germany. After one and a half years of total silence, the first note of Cage’s composition Organ2/ASLSP was played on Friday evening, February 28, 2003. It will take 639 years before the last note is played.

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and cacophony. “Although often described as a silent piece, 4’ 33’’ melodies, caesuras and rests. Many of his pieces, such as “Fratres” isn’t soundless at all,” wrote music critic Peter Gutmann. While the (1977), contain moments of total silence. The music journalist Chris- performance makes as little sound as possible, Cage breaks the tian Hoesch even believes that these moments of inner quietude and traditional boundaries of the concert by drawing attention away silence in Pärt are actually more important than the music in between. from the stage to the listener, and beyond the concert hall. “You “The key to this effect lies in the way the composer totally withdraws soon become aware of a huge amount of sound, ranging from the from the means of composition,” he writes in an article that describes mundane to the profound, from the expected to the surprising, from Pärt’s work as composed silence. “Arvo Pärt’s music is elemental the intimate to the cosmic – nervous giggling, shifting in seats, to a degree that at first glance it is almost even more amazing to breathing, air-conditioning, a creaking door, passing traffic, an air- realize what it does not involve, what has deliberately not been used plane, ringing in your ears, a recaptured memory,” remarks Gutmann. in its composition.” Pärt himself has been said to have believed that “This is deeply personal art, which each witness shapes to his or silence was always more perfect than music. her own reactions to life. Concerts and records standardize our The Time Between the Notes responses, but no two people will ever hear 4’ 33’’ the same way. It’s the ultimate sing-along: The audience (and the world at large) But only, one might protest, if the context is right, if the pauses are becomes the performer.” so artfully incorporated that the listener can suffuse them with his feelings, thoughts and life, so that the effect of silence is created. The Primeval Source of All Sound “Pauses are music, too,” says music critic Shirley Apthorp. “In Japa- The new music of the 20th and 21st century offers many examples nese there’s the word ‘ma.’ It means silence or quiet, or more spe- of experiments in extremes of noise and silence. Cage’s 4’ 33’’ is cifically the time between notes. It was a harpsichordist who first certainly one of the most extreme and unusual, as is the work of the made me aware of the time between the notes and its significance, Italian composer Luigi Nono, who started experimenting with indus- and I’ve been fascinated ever since. There’s so much space, flexi- trial noise sound fragments in the 1950s. One of his key works is the bility and expression to be found there.” Apthorp considers Italian string quartet “Fragmente – Stille, an Diotima” from 198 0, a tender conductor Claudio Abbado a master of silence. “It’s breathtaking to collage of individual sounds, fragments of conversation and single experience how at the end of a concert Abbado is able to sustain a tones. “Nono was a Venetian, he lived on the island of Giudecca,” whole minute of absolute silence in the room before the clapping a critic once wrote. “And just as in Venice the land rises from the begins. This tension-filled meditative moment knocks me over every surface of the lagoon in a sprinkling of islands, so does an archi- time.” Abbado, who has conducted ensembles including the Berlin pelago of sounds arise from a sea of silence in his string quartet. and Vienna symphony orchestras, believes silence is an essential Silence is the original state of being from which all sounds arise and part of music. In interviews, he often cites the fourth movement to which everything will return. In this piece, as much is silent as is of Mahler’s Ninth Symphony as an example of great music. After expressed in sound. There is probably no composition more secre- the dynamic and rousing first three movements, the piece ends with tive than this.” Nono, who died in 1990, did much to raise the aware- the strings getting quieter and quieter. When the last note sounds, ness of the listener, and one of the ways he did this was with silence. the listener feels as if a star is fading away in a glowing firmament. In his essay “Error as Necessity,” Nono writes that the most impor- “To abide in silence,” says Abbado, “means your having listened tant thing is to sensitize the ear, the eye, human thought, intelligence, with special intensity.” And, we could also say, having lived that way an inwardness turned outward to the greatest possible degree. as well. <

Silence, Pauses Creating Tension in Films

A composer who uses pauses, and thus silence, in another musical context is the Italian Ennio Morricone, who is especially famous for his film scores. For example, the catchy, ominous melody played by the harmonica in the classic Western “Once Upon a Time in the West,” directed by Sergio Leone. Especially notable is the film’s 12-minute opening sequence where the camera shows a railway station in a barren, God-forsaken landscape, with the killers waiting for their victim to arrive on the train. There is a creepy silence carried by the wind, the squeak of a sign and the buzzing of a fly. Then we hear the unforgettable melody of the harmonica, as the intended victim (Charles Bronson) finally appears on the platform. “In this film,” wrote the journalist Wolfgang Sandner, “there is always something unexpressed and invisible in the air, something from the past, and we say to the messenger of this: Music and sound are always in the metaphysical sphere.” Music has always tried to express or create a sense of mystery, silence, quietude, slowness, reflection, mysticism and contemplation. This is especially the case for sacred music. A modern exponent of this art is the Estonian Arvo Pärt. His works are characterized

Photos: Ben Martin, Michael Ochs Archives, Getty Images | Hulton-Deutschby Collection, Corbis | Eckehard Schulz, AP falling melodic arcs, moderate tempi, basic harmonies, simple

Credit Suisse Bulletin 2/09 Silence Returns Home

12 Silence Photo Reportage

Text: Ingo Petz Photos: Andrei Liankevich, Altemus

It is only four steep kilometers uphill, but in reality it’s a world and cold sweat. The walls are decorated with large posters: Jesus, away. Then you see the neglected farmhouse, smoke rising from its Mary the mother of God, Slav saints, churches and monasteries chimney into the evening sky. In the moonlight the house, with its feature in some of the pictures. Others show bell peppers, chickens, barn and stables, is nestled amid the snow-covered meadows, like apples, bananas, pineapples and sausages. “You needn’t think we an egg in a large nest. If you live here, where nature rules the roost, live like savages here,” Kalina chuckles in her husky voice. Wide then two things are more important than all others: food and God. eyes peer out from behind thick spectacles. “You’ve got to brighten There is plenty of both in the single, all-purpose room where Hanna it up a bit, wherever you live.” Hanna, with her gaunt cheeks and and Kalina Brjanik live. The small, dark space houses two beds, one bony fingers, stands there in the middle of the room and smiles from table, two stools and an old stove. It smells of burnt wood, steam under her headscarf. Then she lets out a high, harsh sound and

Bulletin 2/09 Credit Suisse Photo Reportage Silence 13

gesticulates wildly. The 69-year-old has been deaf-mute since birth. Hanna and Kalina’s small farmhouse is still occupied. Kalina The two sisters live in the mountain village of Kuzhbej (Кужбеї) relates how some 30 homes once stood on the hill and terraces. in the Carpathian mountains of Ukraine, not far from the small town The last neighbor moved away around the early 1990s. The 57- of Mizhgir’ja (Міжгір’я) – together with their cow, two pigs, a goat, year-old can’t remember exactly when. But then what do facts and two cats and six dogs, but without electricity or running water. To be figures matter in this kind of environment? She does remember, honest, Kuzhbej is no longer a village. It has been abandoned for however, that the neighbor once broke her sister’s arm with a big more than 20 years now, one of the many villages that were deserted stick because she let the livestock graze on one of his fields. because there was no longer any money to be made from farming “I’m glad he’s gone, the beast! We’re fine on our own.” Kalina, who and the inhabitants left in search of a higher standard of living. Only can no longer leave the house because of hip problems, leans >

Credit Suisse Bulletin 2/09 14 Silence Photo Reportage

against the railing and gazes toward the forest. “Just look how lots of children here. We had so much fun, laughed so much.” beautiful it is here. You should come in the summer. That’s when There is no more children’s laughter now. The silence is pervasive. things blossom into life.” Hanna and Kalina were born in Kuzhbej. Covered in snow and brushwood, a few rotting fences and ram- Neither has ever married. Apart from a brief episode at the be- shackle wooden huts are all that remain of the old times. Yet on ginning of the 1980s, they have spent their entire lives in the village. an outcrop, a tiny wooden church still stands intact. A sign reveals “Where else am I going to live?” Kalina asks. “Anyway, we need each that it was built in 1937. Once a year, a priest comes by to cele- other.” Earlier, during the time of the Soviet Union, Kuzhbej still brate mass. “A great famine is coming soon, and many people will had a school, a social club – and electricity. There was even a bus die. God is punishing us for our sins. That’s what the priest told to link this remote village with the rest of the world. “There were us,” warns Kalina darkly. In another part of the village is a small

Bulletin 2/09 Credit Suisse Photo Reportage Silence 15

cemetery, in which the crosses that mark their parents’ graves look her cell phone. The tiny household has had a mobile phone since down into the valley. Around them is the vastness of the evening 2007. It is a convenience like the small diesel generator that sky at twilight and the stunning panorama of pine-covered moun- Kalina uses to run the single lightbulb in the kitchen area and tains, snowy mountaintops and the broad, brown valley below. her modest radio. Her puffy fingers fiddle with the tuner and The nearest human neighbors are lower down, in the municipality the speaker crackles. Then we hear music. Kalina’s eyes sparkle of Sojmi (Сойми). Once a month, Hanna walks to Sojmi to collect and her fat cheeks beam. She reaches for the little glass on the sisters’ meager pension from the post office. She puts most of the table. “I pray,” she cries. “I pray you live to be 100. No! Forget LWLQWKHEDQNDQGXVHVWKHUHVWWREX\WKHEDUHHVVHQWLDOVƠRXU that! I pray you live to be 300!” If you live where the sky really is pasta, rice – and a bottle of vodka. She also tops up the credit on the limit, anything seems possible. >

Credit Suisse Bulletin 2/09 16 Silence Photo Reportage

Andrei Liankevich was born in the Belarusian town of was a photojournalist with the Belarusian arts newspaper Hrodna in 1981. He is one of his country’s best-known Nasha Niva (Our Field). His pictures have appeared in the photographers. He studied economics at Belarus State New York Times, in Der Spiegel, in Die Zeit newspaper, and University before devoting himself to photography in in the most popular publications in Central and Eastern 2004. Between 2004 and 2005, he studied at the Cau- Europe. This report was produced as part of a commission casus Media Institute, graduating with a photographic for Sputnik Photos, an association of photojournalists essay on the Yezidi ethnic minority, for which he earned from Central and Eastern Europe. plaudits at the World Press Photo Seminar. Liankevich www.liankevich.com, www.sputnikphotos.com

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Out ...

Credit Suisse Bulletin 2/09 18 Silence Deafness

...... of the Silence

Leonie, aged five: She knows the world of silence only from bathing and sleeping.

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the absolute certainty about Leonie’s inability to hear brought brain stem audiometry at the age of three months. Even though it no longer came as a great shock, as there had been a bit of time to get prepared, the definitive diagnosis was nevertheless shattering at first. It gradually dawns on you what the far-reaching consequences will be for you as a parent, and above all for your child, when you are without such a vital sense for communicating. As parents, we intel- lectualized about talking with Leonie in sign language. We feared being unable to have comprehensive dialogues with her, even if on closer inspection we found sign language to be a rich language. All these worries also prompted us to rail against the statistics to some extent: Ultimately, it affects only one in every thousand new- born babies.”

When Silence Creeps Up on You

Hans-Jörg Studer says he didn’t rail against things initially. The current president of the Swiss CI Interest Group, who has a CI in both ears, was forced into deafness in 1975 at the age of 30 after suffering a viral infection. At that time, he and his wife – both trained chemists – were just taking over a pharmacy in Liestal. The triple burden of career, military service and above all being a new father – compounded by physical weakness – presumably brought him to his fate. Over a period of three weeks, his condition gradually deteriorated to one of total deafness. For Hans-Jörg Studer, this feeling of bewilderment is deep-rooted to this day: “I was suddenly separated from myself, which was terrible. I shouted out around the house, so I could at least try to hear my voice. But Silence: A healthy dose of peace and quiet does wonders there was nothing there.” He was to spend the next 13 years in this for our mental and spiritual well-being. For those of us who are silence. deaf or lose our sense of hearing, however, it can be a cruel Studer was not initially aware of the full extent of the cards he fate. But a technical wonder – the cochlear implant – can pave had been dealt. He very quickly learned to lip-read from a relative, the way back from silence. thus opening a door to communication and the world of the hearing. At work he swapped roles with his wife, who from then on handled the consultancy side while he switched to the back office. Heavily into work and family, he only became aware of his loneliness and Text: Regula Gerber isolation after around three years. Bernd Strauchmann is head of administration for the CI Center “I’m lucky, Dad, aren’t I? I can just pull out the CI (cochlear implant); at Zurich’s University Hospital (USZ). He has often observed this then I don’t hear any more and I can sleep in peace or take a bath. phenomenon: “A person’s withdrawal from their environment and It’s practical; other kids can’t do that.” Leonie sits expectantly on the entry into isolation generally takes years and tends to creep up on edge of the bath tub and gets her father, Patrick Lienert, to take out them. As Immanuel Kant said: “Not being able to see separates you the two speech processors that form part of her CIs (see box on from things, but not being able to hear separates you from people.” page 21). Leonie is a happy, lively five-year-old who enjoys going People who go blind can continue to develop their mental and com- to kindergarten. And since birth she has been extremely hard of municative faculties, but those who go deaf cannot. They suddenly hearing. That puts her among the 70 or so children born with this need interpreters for their everyday life, as every phone call, doctor’s disability in Switzerland every year. visit and shopping trip becomes an obstacle. A person who is hard Leonie was lucky that she was the ideal patient to receive a CI of hearing must resign themselves to dependency, which generally implant: Her auditory nerve was intact, and the cochlea was not imposes a huge burden on a relationship. ossified. That meant she could have her first implant inserted at That was also the case for the Studers. “To some extent I felt very the age of 11 months, and the second one at nearly two years old. helpless and childlike,” says Hans-Jörg Studer. “Among my group of Thanks to that fact and her good physical and mental health, her friends I could no longer follow conversations by lip-reading, even disability is not immediately recognizable to outsiders. And Leonie’s though my wife helped me wherever she could. On top of that, spon- hours of silence are confined to sleeping and bathing. To this day, it taneity in conversation suffers badly. With a hearing impairment, amazes Patrick Lienert when he thinks back to Leonie as a baby. hearing, understanding and responding are separate steps and there- “The hearing screening test at the hospital at the time following the fore hard work, which is why everything takes longer. Now and again birth was negative,” Patrick Lienert recalls. “But that could have you put your foot in it, or are mistakenly seen as stupid.” Studer more had other causes, and so at the outset I wasn’t too worried about it. than ever missed a good conversation, classical music, the dawn

Photo: Katharina Lütscher Katharina Photo: With each investigation, however, the diagnosis grew more likely, and chorus and the voices of his now two children. Also, at events >

Credit Suisse Bulletin 2/09 20 Silence Deafness

attended by large numbers of people he felt alone because he often did not know what exactly was being talked about. Studer sometimes had suicidal thoughts. The turnaround came when he learned to no longer regret what he was missing and enjoy the things he still could enjoy. “The burden of knowing what you have lost is a heavy one. But the whole time I was deaf I still went to the theater or ballet with my wife,” says Studer, “I felt the rhythm and simply enjoyed the choreography and stage sets.”

Living Language as a Dream

These days, Hans-Jörg Studer would probably have to wait a maximum of a couple of months rather than 13 years in order to regain some degree of his hearing. Through his work on the Late-Onset Hearing Loss Committee of pro audito Switzerland, the forerunner of what is now the Swiss CI Interest Group, he encountered the latest technical developments in CI on a regular basis. By 19 8 8, they seemed to have advanced far enough for him, and he decided to have an implant inserted in his right ear. The road back to hearing is not an easy one, but hospitals like USZ have an entire team able to provide a full range of advice and support. “We’re happy to provide advice, but the definitive decision Hans-Jörg Studer: Being able to hear music and voices again for a CI is ultimately taken by the parents of a child or by adults after 13 years of silence was like being reborn. themselves,” says Bernd Strauchmann. “With children and young people especially, it is important that they themselves want to take this step; otherwise, the speech processor will wind up in the trash can. In the end, though, only a few decide against it for medical, cosmetic or other reasons.” Until the consultation at USZ, Leonie’s parents had never heard of CIs before. From their initial conversation there, Patrick Lienert was immediately convinced of their potential. His later experience at a CI medical conference, where two parents spoke about their child’s CI and showed a video, proved decisive. “I watched these parents communicate quite normally with their child using spoken language. From then on, it was my hope and my dream that we too could experience that.” For Leonie’s mother the doubts and fears lingered a while longer because she considered it a major intervention in which her child was ultimately unable to have a say. But after giving the matter con- siderable thought, she too decided in favor of the operation. Patrick Lienert is also aware that “it’s obviously a big responsibility that you have to bear as parents, because it has such a strong influence on the course of someone’s life. Both of us, however, were conscious of the fact that the operation might not succeed, and that something irreversible could happen.” Bernd Strauchmann fully understands this point of view, saying: “For an ear surgeon, this operation is rou- tine; but for the parents of a baby, for example, it’s a major intervention. In overall terms, however, the risks can be classed as very low. Only very rarely does an infection occur, or does the facial or taste nerve running through the middle ear get damaged.”

Realistic Expectations Are Necessary , Basel AG Alongside medical investigations and tests for the purpose of assessing suitability for the operation, the team talks with patients about realistic expectations and prognoses. “The fact is, expectations are in most cases incredibly high,” says Strauchmann. “Patients often have preconceptions such as being able to use the telephone and listen to music again. But with a CI, it is primarily about lan-

guage being understood again or providing assistance with lip- Photos: Katharina Lütscher | Cochlear

Bulletin 2/09 Credit Suisse Deafness Silence 21

reading. It does not mean being able to hear again normally; that cannot happen. And it all becomes very difficult if no speech development has taken place in the first seven years due to deafness. In 2 such cases, we have to tell people that with a CI the patient usually gets just an impression of noise – not speech.” Hans-Jörg Studer deliberately kept his expectations low. He 1 knew it would not be the same sort of hearing as before. He did not allow himself to be swayed by what is at times misleading advertising, thinking anything better than deafness would be an improvement. 3 And there was more of an improvement than he imagined. He is still astonished when he thinks about the first time he could hear again: “After 13 years of silence, there were suddenly sounds and noises again. It was indescribable! It’s like being born again; suddenly you can hear yourself speak again, hear music again, can have telephone conversations again, watch television. Dealing with people suddenly became simpler, especially at work. Life for me was three-dimen- sional again; I could hear people speak, and they could come up and talk to me.” After the initial joy, however, came the long hard A cochlear implant is suitable for children road back to hearing properly – distinguishing the important from who are born deaf or subsequently lose the unimportant – which continues to this day. their hearing, as well as adults who have become extremely hard of hearing or Leonie’s Speech Development Has Caught Up With Her Peers’ deaf after acquiring language. Patients For Patrick Lienert too, it is clear that Leonie is still on a road whose must have a functioning auditory nerve destination is unknown. But for him the crucial thing crystallized just DQGDFRFKOHDWKDWLVQRWRVVLƟHG a couple of weeks after the operation: “Even though there were The CI is an electronic inner ear prosthesis technical limits, we were able to relate to Leonie through speech and takes on the role of the damaged and communication. Due to this fact alone, my expectations were hair cells. A small microphone picks up very quickly surpassed. It affected me hugely, and gave me confi- sound waves that are then converted dence when Leonie responded to my voice for the first time by turn- by the 1 speech processor into digitally ing her head. Suddenly she could be calmed by persuasion, where- coded signals and transferred to the headas previously she would have continued to yell. She began to enjoy piece coil of the 2 implant lying under songs and language games.” The more Leonie’s development re- the skin. There, the coded signals are con- turned to normal and the more the progress became apparent, the verted into electrical impulses and trans- more Lienert’s feeling of devastation changed to one of gratitude. mitted to the 3 22 electrodes in the cochlea. While speech development in Leonie’s case started slightly later, today she is at the same level as her peers. After just three years, 7KH\VWLPXODWHWKHDXGLWRU\QHUYHƟEHUV and a sense of hearing occurs in the brain. Leonie was trying to telephone, sing songs and imitate the pitch level and speech expressions of her parents. And when Leonie An implant is inserted in four stages: speaks today, you hear a girl who really enjoys using language – 1. Pre-examination, decision and prepara- High German included. She often sings a song or recites a poem. tion 2. Operation 3. Adjustment and adap- For her parents, the hearing impairment on a day-to-day basis now tation of the speech processor 4. Follow-up consists of organizational things like changing batteries and making FDUHKHDULQJVSHHFKWUDLQLQJDQGƟQH technical adjustments every couple of months. Each day with Leo- tuning. These stages occur over several nie is otherwise largely normal, educationally challenging, and not months. The actual success of the CI often at all quiet. The fact is, Leonie is not looking for silence. From the appears only after the recipient becomes time of the very first adjustment, she wasn’t keen on giving her CI accustomed to the “new hearing,” a long to the audiological trainer, and is still unwilling to do so. “Why is that, and intensive process. Today, around Leonie?” “Because I like being able to hear.” And with that she starts 140,000 people worldwide have an implant, humming a tune. < 1,400 of them in Switzerland. Information and help on all aspects of cochlear implants, as well as addresses of the existing CI centers, can be found here:

Swiss CI Interest Group, www.cochlea-implantat.ch

CI Center Zurich, www.CI-Zentrum.com “I Want to Hear” Initiative, www.ich-moechte-hoeren.ch

Credit Suisse Bulletin 2/09 22 Silence People

“Timeout Not Burnout”

Bulletin 2/09 Credit Suisse People Silence 23

and calm, and I can see all the way to the bottom. Silence brings me to myself. It creates clarity. Your book “Weg der Stille” (Path of Silence) encourages people to be mindful of silence. Why is that important? The Danish philosopher Søren Kierkegaard once said: “If I were a physician and someone asked me: What do you advise? I would answer: Be still.” Our everyday life is becoming ever more hectic, and the wheels of business and society are turning faster and faster. This stress is making us sick in body and soul. Silence is an effective, tried-and-tested remedy, with no side effects. 0HGLFLQHLVMXGJHGE\LWVHIƟFDF\:KDWDUHWKHSRVLWLYH effects of silence on our well-being? People who seek and nurture silence are more balanced and relaxed, and are usually easier to get along with; they are more centered and present. And being present is itself a present for other people. People appreciate this quality, whether at home or at the office. A boss who loves silence is a good boss. In terms of evolution, noise seems to dominate over silence. Is it possible that people don’t need silence anymore? It’s true that nowadays people can handle a high degree of complex- ity and have developed the ability to multitask. But I don’t believe that in the longer term people will be able to live without silence. Especially as the noise increases, they will need to be able to retreat. The longing for silence is there. All the same, people are voluntarily exposing themselves to more and more stimulation. Contemplation and meditation don’t seem to be quite the thing for the iPod generation. I disagree. Meditation and prayer are fundamentally human, as Noise is bad for our hearing, concentration and circulation. natural as breathing. Of course, there are skeptics who think this is The Jesuit Zen Master Niklaus Brantschen believes it is something exotic or pious, but most people have good antennae also bad for our soul. We talked with him about the meaning for such things. Also, young people today are not as degenerate as of silence. we may think. And remember, it doesn’t have to be Zen meditation; there are other paths to silence, for example hiking or walking in the woods. The most important thing is not to be afraid of silence, to be open to it. As a co-founder of the Lassalle-Institut in Bad Schönbrunn, Interview: Michael Krobath Switzerland, you primarily address managers. What are the managers who come to your courses looking for? Bulletin: Niklaus Brantschen, how much silence do you Themselves. They have lost themselves. They want to reduce stress, need every day? sleep better, or come to terms with their life partner. Others are Niklaus Brantschen: 24 hours. I want to live in a perpetual state of trying to find out whether to change careers, or they come to us to inner quietude. But to retain this state permanently, I also have to gain strength to get to grips with their everyday lives. take time to cultivate silence. That takes about an hour a day. ,QVWDQWVLOHQFHDVVSLULWXDOƟWQHVVWUDLQLQJ" What do you do to reach this peaceful state? Zen is not a keep-fit method. Our efforts are directed toward ini- I do nothing. I simply sit. In other words, I practice Zen meditation. tiating a change in consciousness. It’s about the meaning of life, Silence cannot be produced. It has nothing to do with the usual what is truly fulfilling. This isn’t possible without silence, time and chatter and running around. It is a counterpoint to the busyness of reflection. everyday life. What is your experience of stressed managers suddenly It sounds simple. confronted with silence? But that’s precisely what makes it so difficult. The story goes It’s like slamming on the brakes. First, they experience a big jolt, that when Michelangelo unveiled his statue of David in 1504, the then they draw a deep breath. Then they think: Thank goodness, it’s Florentines asked him: “How did you do that?” His answer was: okay. They start to reflect more. Silence is also a process of taking “It was easy. I simply got rid of all the bits that weren’t David.” The a step back. It enables them to get a new perspective and set new real art is to let go of what doesn’t belong to your true nature. Then priorities. Instead of pursuing trivialities, they start looking forward a deep inner peace will emerge. and focus on the really important issues again. What’s the use of that? You write that homo oeconomicus is an atrophied human. When I sit and observe my breathing, I experience who I am. It’s like What do you mean by that?

Photo: Oliver Lang Oliver Photo: a lake: If I don’t splash around or throw stones, it becomes smooth This notion comes from the physicist Hans-Peter Dürr. It describes >

Credit Suisse Bulletin 2/09 24 Silence People people who block out what is most important, for example their heart Advocate of Silence Niklaus Brantschen, born or their spiritual intelligence. Spiritual intelligence refers to the way 1937 in Randa in the Swiss Canton of Valais, I stand, the way I breathe and how I view the world, whether my view is a Jesuit, priest and authorized Zen Master. In 1995, is holistic or confined to my immediate surroundings. For better or together with Pia Gyger, he founded the Lassalle- worse, we humans have to make a go of it on spaceship Earth, so Institut in Bad Schönbrunn in Canton Zug, dedicated we need to think and act holistically. Some top managers in inter- to Zen, ethics and leadership. His work is respected national business still have too little awareness of this. They lack the by managers and politicians as well as the general distance they would need to set the right priorities. In my view, this public. Brantschen is a popular speaker on the inter- is one of the reasons for the current financial and economic crisis. national scene and the author of numerous books. Does the business world need spirituality? His book “Weg der Stille. Orientierung in einer lärmi- Oh yes. Otherwise it will just go round in circles. It’s like a hamster gen Welt” (Path of Silence: Finding the Way in a Noisy in a wheel: Everything goes fine until something unexpected World) was published in 2004 by Herder Verlag. happens. The question is whether consumerism is the be-all and end-all, or whether less could actually be more. Doesn’t a refusal to consume go against our whole economic system? After all, it depends on everyone producing and consuming more and more. I see the pressure to consume as a vicious circle that is destroying people. It can’t keep spiralling upwards; we need a radical rethink. People will have to become more modest. Moderation is a core value that has been newly discovered. ,Q\RXUERRN\RXZULWHWKDWLWLVVRFLHW\ŒVGXW\WRƟJKWIRUOHVV noise and more silence. How could society be organized to avoid noise and communication overkill and create more space? First you’d need the usual external measures: traffic calming, noise barriers, quiet rooms in public buildings, quiet compartments in trains. But the absence of noise does not equal silence. Having a fence around your garden is not enough if you want to grow good vegeta- bles. You also have to tend and cultivate them. How can this be done? We need a culture of silence, we need to be brought up with it. It starts in infancy. The German word for breast-feeding, “stillen,” is related to the word “still.” If a mother nurses her child in a loud environment and her thoughts are distracted, the child may be fed but it won’t be nourished by stillness. The process can continue in schools, where there are already teachers who have their students sit quietly for a few minutes before the lesson begins. And aware managers have designated a quiet room at the office. To cultivate silence you have to give it a place in your everyday life, because it won’t happen without practice. You have to stop being busy to experience the power of silence. With the population explosion, urban growth and increasing WUDIƟFWKHUHDUHIHZHUDQGIHZHURDVHVRISHDFH,VVLOHQFH becoming a luxury for the well-to-do? This line of reasoning applies to material values, but not to spiritual ones. Silence can be experienced everyhwere. It’s not something that can be bought. You’re given it for free in the forest or in the mountains. It’s not a question of money. It’s a question of the time you take for it. Time is money and people are getting busier and busier. Don’t you think you could end up being a lone voice in the wilderness? They say necessity is the mother of invention, and I’m finding that people are increasingly saying: “Now I’m really going to take the time.” Because they sense that the time they spend in cultivating silence is a good investment. Afterwards they are much more aware, which has a beneficial effect on their life, work and performance. I am hopeful that more and more people will start choosing “timeout” over “burnout.” <

Bulletin 2/09 Credit Suisse Physics Silence 25

Credit Suisse Bulletin 2/09 26 Silence Physics

carried out some impressive experiments in this field. He used highly sensitive electroencephalograms (EEGs) to examine eight people who have dedicated their lives to meditation: Eight Buddhist monks, followers of the Dalai Lama, agreed to take part in some extraordinary experiments. One of them is French-born Matthieu Ricard, regarded as a close confidant of the Dalai Lama. Matthieu Ricard and Richard Davidson, together with three other scientists, Antoine Lutz, Lawrence L. Greischar and Nancy B. Rawlings, published the surprising results of their work in the Proceedings of the National Academy of Sciences. Changes in the brain during meditation can be measured with brain activity analyses. Scientists have long been searching for the frequency of silence, but they suspected that it would be found in an entirely different range. In the past, researchers focused mainly on the so-called alpha waves in the EEG. They equated the presence of these waves with “meditative” relaxation. Alpha waves are generated when we close our eyes and drift off into our dreams. In Total Harmony With Their frequency is between 8 and 13 hertz (Hz). When we are asleep, they change into theta waves with a frequency of 4 to 8 hertz. High-Frequency Vibrations However, no fundamental changes could be detected in this frequency range: Silence is not merely nothing. From the viewpoint of neuro- Delta waves 0–4 Hz (deep sleep) psychology, silence is a condition of high concentration Theta waves 4–8 Hz (sleep, trance) while in terms of physics, it consists (like other sounds) of Alpha waves 8–13 Hz (relaxation) frequencies which we can “hear.” These attributes can also Beta waves 13 –30 Hz (attentiveness) be put to practical use: Certain sounds suggest silence, Gamma waves 30–70 Hz (concentration) and one noise can be “switched off” by another. Likewise, true inner silence can be achieved through meditation. Groundbreaking Discovery in the Gamma-Wave Range

The tests at the University of Wisconsin focused on an entirely different area: the gamma waves. These involve electrical brain activity at frequencies above 30 hertz, which mainly occur during maximum cognitive performance. The researchers made a ground- Text: Elke Bunge breaking discovery here. Matthieu Ricard, who is not only a Bud- dhist monk but also a trained molecular biologist with a doctorate in It is Thursday evening. Nine women and three men are lying in a cellular genetics, meditated under scientific conditions. The elec- circle on their blankets. They are wearing comfortable clothes, the trodes of an EEG were connected to his head to record his brain lights in the room are dimmed and it is quiet. activity while he was performing this mental exercise: There was a This is a yoga session with meditation. The teacher starts by say- significant, thirtyfold deviation in this range. The same observations ing: “Let’s breathe in and out deeply, and each time we breathe out, were made for the seven other Tibetan monks who had devoted their we shall surrender more of our bodies to the ground. Let’s concen- lives to mental training and meditation for more than 15 years. Ten trate on our foreheads. How does this area feel? How turbulent comparative subjects with no previous experience of meditation but are our minds? Let’s relax our foreheads, across their width, height a strong interest in this method showed no characteristic changes and depth. Stay with this feeling of relaxation. If any thoughts, feel- in this range. ings, memories or inner images surface, let them pass by like clouds Work is also being undertaken on this subject at the University of in the sky.” All the participants in this course are concentrating Giessen in Germany. Professor Ulrich Ott of the Bender Institute of intensely, and the members of the group have known each other for Neuroimaging describes the results obtained by his US colleagues several years. Meditation is a time of maximum concentration and as “the inspirational EEG.” He calls the significant deviation in it is something that has to be learned. Anna Trökes, a well-known the gamma-wave range “the oscillation of silence.” No matter how yoga teacher and author of numerous books on this subject, writes relaxed a Buddhist monk might seem during meditation, his brain is in her “Big Book of Yoga”: “Meditation isn’t something that you can by no means switched off at this time. On the contrary: Attentive- make or force yourself to do. If you try that, you’ll find that your mind ness is at its height as he is sinking into contemplation. So, accord- becomes rigid and stubborn like an obstinate donkey.” She adds: ing to the latest scientific findings, “becoming silent within yourself,” “Meditation means becoming silent within yourself.” as Anna Trökes describes meditation, means a moment of maximum inner concentration when every nerve cell is emitting a high-fre- Scientific Experiments With Silence quency oscillation. The scientists also agree on another point: At But what does “becoming silent within yourself” actually mean? times of inner reflection, a harmony develops among the individual Science is also interested in this question. American neuropsychol- oscillations which emanate from the brain. Researchers now believe ogist Richard Davidson of the University of Wisconsin–Madison has that this harmony of high-frequency oscillations is responsible for

Bulletin 2/09 Credit Suisse Physics Silence 27

Seeking inner silence: A geodesic sensor network equipped with Combating noise with counternoise: In a Saab 2000 propeller 256 electrodes allows extremely precise measurement and analysis aircraft, counterwaves are emitted through loudspeakers to of brain activity. partially neutralize the engine noise waves.

the feeling of perfect inner satisfaction. In his dissertation written through more loudspeakers. According to this principle, the waves back in 2000, Professor Ulrich Ott advanced the theory that the generated by the propellers and the artificially created counterwaves uniformity with which the gamma waves are emitted from the would cancel each other out. This required a complex calculation, brain has the ability to synchronize the various areas of our brain. He given the many different frequencies produced by a propeller. The believes that this synchronization is responsible for human conscious- first step was to carry out a frequency analysis of the oscillations ness. Accordingly, meditation and inner silence are in fact times of generated by the propellers. Fourier transformation, a complex maximum inner concentration when we become conscious of our- mathematical operation, was used to calculate a delayed oscillation selves. which would accurately obliterate the oscillation that was previously It follows that inner silence is a frequency which the neurons emit analyzed. This made it possible to cancel out about half of all the synchronously from different areas of the brain. It is not a gift, but oscillations created by the propeller which were transmitted into the rather something that takes many years to learn. And it has to be passenger cabin. The passengers experienced silence in the cabin. learned in an era when silence is an increasingly scarce commodity. But times have changed since then: Crossair has been taken over We are plagued by the commotion, tumult and stress of the outside by Swiss, which now only flies jet planes. world. Cities are growing larger and louder, work is becoming more Using White Noise to Mitigate Sounds grueling and stressful, and people are more overwrought and irritated. We are exhausted by the pressures of everyday life and we Canceling out noises is not a new discovery. As long ago as 1936, long for inner harmony and peace. Silence can be restored through German physicist Paul Lueg applied to the United States Patent yoga and meditation. Office to have this idea protected in a publication entitled “Process of Silencing Sound Oscillations.” He is considered as a pioneer in Simulating External Silence for the Brain the field now known as active noise control. His key statement: If Is it also possible to create silence artificially, outside of the brain? two identical sounds which are phase-shifted (offset by exactly one Can silence be simulated at times when it is not really present? half of an oscillation) meet one another, they will cancel each other Science is also looking into this question. Researchers are now able out. In his patent, Lueg quite deliberately drew a distinction between to simulate external silence for the brain in certain situations. The active noise suppression achieved by generating phase-shifted experts call this specialist area “sound engineering,” and it goes counterwaves, and suppression of noise at individual unpleasant far beyond abstract theory. For example, the former Swiss airline frequencies produced by interspersing other frequencies which then Crossair used this method to reduce noise in its propeller aircraft. In prevent the perception of the unpleasant noises. Noise suppression, the Saab 2000, one of the fastest turbo-propeller passenger planes, from which Lueg demarcates his patent, was already known before 72 microphones in the cabins captured the noise produced by the 1936, and its aim is to reduce the perception of noise by tricking propellers. In a very short time, an electronic noise control system the senses. This method is also more relevant nowadays than ever

Photos: Jeff Miller, University of Wisconsin–Madison | Thomas Klein | generated Kaspar Vogt, Basel counterwaves which were fed into the passenger cabin before, because it has recently begun to be applied in open-plan >

Credit Suisse Bulletin 2/09 28 Silence Physics

So-called white noise aims to simulate some degree of acoustic privacy in open-plan offices.

offices. Electronic equipment at the workplace is making more and more noise. Telephones, computers, printers, photocopiers and the babble of human voices create a stressful environment in an age when more and more people are falling ill as a result of mental factors. In its issue of February 2009, Deutsche Ärztezeitung, the German daily newspaper for physicians, published an article entitled “Growing Number of Absences due to Mental Illnesses.” Last year, 8.3 percent of persons insured by AOK, one of Germany’s largest health insurance funds, fell ill with mental problems. Lack of silence is certainly one of the triggers for these problems. Tech- nical experts are therefore working on new solutions to counteract the increasing loudness of our society. So-called white noise is piped into work areas through loudspeakers to create the impression of a private atmosphere which does not actually exist in an office building. Like the rustling of leaves when a breeze blows gently through the forest, it should make us feel more relaxed as we work. The physical principle could not be simpler: Certain unpleasant sounds can no longer be perceived because they are continuously interspersed with oscillations distributed over different frequencies. “White noise” was coined as the name for this phenomenon by analogy with “white light,” which contains all the frequency ranges of visible light. So we now have two possible ways of creating or simulating silence, either by cancelling out certain sounds or by interspersing different frequencies. Inner silence is another alternative, but it can only be achieved through meditation, which takes a long time to learn. In physical terms, what these different types of silence have in common is the oscillation that is emitted. And in emotional terms, they share the ability to create oases of calm which give our bodies strength in an age when life is becoming more and more turbulent. <

Bulletin 2/09 Credit Suisse Photos: Barbara Staubach, artur | Tobias Madörin | Thomas Eugster Business / Sponsorship /Corporate Responsibility Credit Suisse and the Corporate Citizenship Corporate and the Report. stakeholders external and employees. ment Management, will focus on Seg- Individuals Worth Net High Urs Dickenmann, headas of Ultra Management Advisor Group Chief Operating Wealth Officer as recently, employed was Most he April April 1. past the In on Switzerland Banking Private Rolf took Bögli over ashead of Strengthened Staff SwitzerlandPrivate Banking Switzerland www.euromoney.com for awards its ed Euromoneymagazine haspresent- The prestigious British financial inClass Best Euromoney: Switzerland, Europe, Middle East, Asia office and units support at offront- avariety managed has we are also publishing the Business Review Business the publishing we arealso Annual Report, detailed tothe In addition clients, of trust the strengthening to utes UHSRUWLQJRIDGLIƟFXOWEXVLQHVV\HDUFRQWULE and Openness Transparency awards in individual categories. awards in individual of avariety won Suisse Credit Best Foreign Bank. In addition, named was it Russia, and Kingdom United the In Overall). Services ing Bank- Private (Best Singapore and bank in Switzerland, Russia, Qatar private Suisse is best Credit the surveys, client to comprehensive Among PrivateAmong Banks 2009 30 years, Bögli . According UBS USA . . www.credit-suisse.com/infocus > www.credit-suisse.com/infocus April ica, agreed to deliver a speech on ofAmer- States United ofthe State of Secretary and Advisor Security L. Powell, the former National Yunus in attendance, ColinGeneral with Kofi Annan and Muhammad sance.” Following previousevents Renais- of topic “American the to therefore was devoted Salon Suisse along with it. The third Credit global economy suffers massively is in crisis, America the whole go well for the whole world. When well, does things America When Renaissance American New York Secretary and Prime Minister. Prime and Secretary Major, the former British Foreign valuable from support Sir John received Americas, Banking Private and Anthony DeChellis, head of Shafir, Regional Suisse,senting Credit Robert repre- York, New in hosts two the House Pratt At Harold guests. with thediscussion held afterwards importance. strategic Ban aPrivate to services providing Society/Economy king client group that is of key key of is that group client king 17 and participate in a lively alively in participate and The open CEO Americas, - recruiting members to the Credit ful in and carefully identifying Suisse. thought- very also He was integrated bank strategy for Credit leading the development of the was achievements most significant and shareholders. Suisse employees,Credit clients and excellent on work behalf of dedication his for him thank to and Suisse athis Credit achievements to to take thisoutline opportunity of Suisse but we Credit wanted Re. Walter will remain on the board role as Chairman at full-time Swiss Suisse attoman on Credit take the Chair- of role his from down step Suisse,Credit willWalter Kielholz of Chairman as years six After of Walter On theResignation B. Kielholz Change at the Top of Credit Suisse Suisse Board of Directors, who have ment makes the difficult decisions decisions difficult the makes ment manage- when support by: come to most isis and most needed difficult Walter has Kielholz provided what decision points over that period. critical ofthe atall team agement tive, input and ideas to the man- has also provided valuable perspec- he And years. two last the over akey consideration been has which sector professionals in Switzerland, public other and regulators officials, dialogueimportant with elected an invaluableperformed role in the management team. He has also astrong establish helped and tices corporate governance prac- the-art addition, he put in place state-of- in challenging times.is critical In contributors to the dialogue which constructive and important been Amongst WalterAmongst Kielholz’s new Chairman role at Swiss Re. his in success every him wish and to have him on remain theboard, Chairman role, but are delighted We will miss having him in the years. two last the over competitors our outperform to us allowing in factor acritical been have port hiswe and sup- say his that ideas alike senior management and when members Board for wespeak that itude for all he has done. We know of grat- deal agreat Kielholz Walter holders of Credit Suisse owe share- and clients employees, the that we believe years, two last the of period the unprecedented years, overand most particularly role firsthand over the last six successfully.forward firm’s the strategy drive to tinue and that we are well placed to con- moment to make these changes this is that appropriatebelieve an excellent management team, we rienced Board of Directors and expe- an years. With two past the have made great progress over tremendous client momentum and we are securely funded, we have capitalized banks in the world, best ofthe one We are efforts. his to thanks part important in be, tioned as well as we possibly could been a member of the Board of of the of Board Directors. He has Walter B. Kielholz led Credit Suisse Brady Dougan and Hans-Ulrich Doerig Brady Dougan and Hans-Ulrich start to start astrong had has Suisse Credit from this role at any time is difficult, firm. agreat becoming to and that are the key to outperforming Directors since 1999. since Directors asfrom to Chairman 2003 2009 Having witnessed his critical While losing Walter Kielholz 2009 rdtSis 29 Credit Suisse and we are posi- weare and Credit Suisse Bulletin 2/09 30 Credit Suisse

Credit Suisse Is a Bank in Motion and With an Entrepreneurial Spirit On April 24, 2009, Hans-Ulrich Doerig was elected as the new Chairman of the Board of Directors of Credit Suisse. He is taking over the Group at a time that he himself describes as the biggest crisis since 1929. Despite this, he is optimistic about the future and believes that the Credit Suisse RIWRGD\FDQKROGLWVRZQLQDSHUVLVWHQWO\GLIƟFXOWHQYLURQPHQWDQGZLOOEHQHƟWPRUHWKDQRWKHUV once an upturn comes.

Bulletin: A quick question to must stay prepared to react to any additional aid. I think we can be proud that we are break the ice – why are you such setbacks, we also have to equip ourselves among these few. Of course, you never a fan of yellow ties? now for the time after the crisis. quite know what the future holds. Neverthe- Hans-Ulrich Doerig: It’s true – for years Looking back over the past less, I can’t see any reason why Credit now, I’ve almost always worn a yellow tie. 18 months, how would you rate Credit Suisse would need government aid. We’re I’m sure there are also lots of very nice Suisse’s crisis management? in a very favorable position: We have a ones that aren’t yellow, but I just think that I believe that the Board of Directors and solid capital base, good liquidity, we are a yellow tie is a pleasant, cheery contrast the Executive Board have reacted quickly pursuing a correct and diversified strategy, to the dark suits that are the norm in our and appropriately. Of course, we had to and our top management is very compact. industry. Who knows, perhaps yellow deal with hefty writedowns in 2008. How- I’ve known Brady Dougan for 20 years. ties also come across as more direct and ever, 2007 was our second-best result aggressive. I just find the color yellow in history. Luckily we got rid of a lot of sub- “We have to guard against very positive. But don’t worry – I don’t wear prime securities early on, otherwise the headline-induced panic.” yellow suits! writedowns would now be much larger. In Hans-Ulrich Doerig As the new Chairman of the Board, that respect, our crisis management system you are taking the helm at Credit Suisse has worked – an achievement that is being at a time that many see as a real turn- praised in other countries in particular. What are your personal priorities for LQJSRLQWLQWKHKLVWRU\RIWKHƟQDQFLDO But not in Switzerland …? \RXUƟUVW\HDULQRIƟFH" sector. What’s your view on this? Here, what we have achieved is viewed My top priority is to navigate through the We are currently in the midst of the biggest much more critically – a more frequent current turbulence with a certain flexibility, crisis since 1929. For me, that doesn’t have comparison with the situation abroad would while staying as consistent as possible – to mean that we are entering a depression, certainly help to redress the balance. and without government support. This also but certainly a very serious recession. How- People often forget that those who had a includes the company’s return to profit- ever, a lot has changed since the 1930s – leading position in such a crucial market ability. However, no profound changes social welfare systems and other instruments as the US found it very hard in discussions are required to achieve this aim. We must now exist that have been implemented with clients and employees to justify step- continue to pursue our integrated bank very quickly by the various governments ping out of a business that was performing business model that my predecessor and should soon bear fruit. For this reason, very well. Luckily though, we still exited Walter Kielholz successfully implemented I see the future – in particular, Switzerland’s the subprime business early on. However, together with Brady Dougan, the Board future – in a more positive light than many if we had ducked out of the other very of Directors and the Executive Board. others. We also have to guard against profitable areas that subsequently proved I consider teamwork the most decisive headline-induced panic. After all, there are so problematic, we would have risked factor for reaching our goals. also positive signs, such as the two air- losing our credibility in the eyes of our cli- So there will be no return to old lines Swiss and Lufthansa together ordering ents, our employees and the market. strengths, which means no sale new aircraft worth over 2.5 billion Swiss How are things looking for of the criticized Investment Banking francs. These positive signs are important Credit Suisse in April 2009? division? and need to be reiterated. If you take the world’s 50 to 100 largest No – that would be totally the wrong thing What approach is Credit Suisse banking institutions and subtract all those to do, and would ultimately prove harmful taking toward the crisis? that are state-owned, you wouldn’t have for Switzerland. Banks wishing to differ- We can’t just look at our business in terms many left that have so far managed to entiate themselves from the global compe- of the next quarter. Although we, of course, get through the crisis without government tition in the future need an intact Invest-

Bulletin 2/09 Credit Suisse Credit Suisse 31

ment Banking division. It was clear that the division needed partial restructuring. To- gether with old strengths such as reliability, prudence, predictability and performance, our three pillars mean we have a huge opportunity, which we must make the most of.

“The number of our direct competitors dwindled last year.” Hans-Ulrich Doerig

You mention opportunity. Does this mean that, in a certain way, you even consider Credit Suisse to be one of the winners in this crisis? It might sound strange in view of our loss in 2008, but in some ways I do actually consider that to be the case. After all, in comparison to other institutions, we have done many things right. I am convinced that, once the markets start to climb again, we will benefit more than a lot of others, and will in hindsight be seen as a bank that successfully overcame the biggest crisis. In addition, the number of our direct competitors quite simply dwindled last year. “The abbreviation CS in my opinion doesn’t just stand for Credit Suisse, but also for common sense.” – You have headed the Risk Commit- Hans-Ulrich Doerig, new Chairman of the Board of Directors of Credit Suisse in front of the bank’s head- tee for four years now. How calculable is quarters on Paradeplatz in Zurich. risk in the banking business? Risk management is not a program but an ongoing process that must be developed over time. Our models are constantly re- viewed and improved. On the whole, they have proven their worth. But good risk management isn’t just about mathematical models and systems – it also requires an understanding of the market, intuition and the ability to weigh up what proportions Profile of risk are healthy. In that respect, the Hans-Ulrich Doerig was born in 19 40 in Zug, Switzerland. He grew up abbreviation CS in my opinion doesn’t just in St. Gallen, where he completed a doctorate in economics at the university. stand for Credit Suisse, but also for In 19 6 8, he joined J. P. Morgan in New York via a training program, and common sense, which plays a key role in worked at the investment bank for five years. In 1973, he switched to Credit risk management. Suisse in Zurich. He became a member of the Executive Board in 19 82, What has kept you at Credit Suisse on which he has performed a wide variety of functions. Since 2003, he has for 35 years? been full-time Vice Chairman of the Board of Directors and, as such, head I’ve always been lucky in that I really enjoy what I do. My tasks within the Group of the Risk Committee. Alongside his career at Credit Suisse, Hans-Ulrich have changed time and again, meaning Doerig was also a visiting lecturer for 10 years at the University of Zurich I’ve always had to face up to new chal- and the Swiss Banking School, and has written various reference books and lenges. We are a bank in motion, and with other publications. He is a member of the councils of the University of an entrepreneurial spirit in which each Zurich, the University Hospital Zurich, the International Red Cross and Red person can still make a real difference. Crescent Museum in Geneva, the Fondation Simón I. Patiño, and is Chairman That’s an aspect I’ve always liked, and I of the Society of Zurich Friends of Art (Vereinigung Zürcher Kunstfreunde). have always been proud to work for Credit

Photo: Oliver Lang Oliver Photo: Hans-Ulrich Doerig is married and has two grown-up children. Suisse: I find a company fascinating >

Credit Suisse Bulletin 2/09 32 Credit Suisse

that, since 1856, has paid out a dividend each year in good times and in bad. Credit Suisse Mexico You have always been a man for all Changes at Board Level Market With Huge Potential VHDVRQVPHDQLQJ\RXDUHYHU\ƠH[LEOH Yes, you could say that. After Joe Acker- At the Annual General Meeting on April 24, Hans-Ulrich Doerig was mann left the bank in 1996, I took over elected as Chairman of the Board Monterrey operational management within the space of Directors of Credit Suisse Group. Mexico of 24 hours. Walter B. Kielholz will remain on Panama Caracas the Board. The new full-time Vice Bogotá Chairman is Urs Rohner, former “I find a company fas- COO and General Counsel. Lima cinating that, since 1856, Andreas Koopmann, CEO of Bobst Rio de Janeiro São Paulo has paid out a dividend Group, and John Tiner, CEO of Montevideo each year in good times Resolution and former CEO of the Buenos Aires UK Financial Services Authority, Santiago and in bad.” have also been newly elected to Hans-Ulrich Doerig the Board of Directors. Richard “Mexico has become one of the E. Thornburgh, who has been a world’s 12 largest economies,” em- member of the Board of Directors phasizes Christian Wiesendanger, Despite this, you have always been since 2006, will now head the Risk head of Private Banking Latin the “right-hand man” to someone else. Committee. Thomas W. Bechtler America. For this reason, Credit This is why some journalists claimed you has left the Board, having served Suisse, which has operated in would be Vice Chairman forever. Does the maximum term of office Mexico since the 1960s, has con- (15 years). The new General Counsel siderably expanded its presence that annoy you? is Romeo Cerutti. since 2002. The bank is particularly Not at all. Have you ever seen me looking strongly represented in the invest- fed up? If I had become Chairman earlier, ment banking business. In 2007, Credit Suisse for instance orga- I would have missed out on the many other Hong Kong voluntary posts that I’ve held. I’ve also nized the stock market flotation of Credit Suisse Sponsors Banco Compartamos, a microfi- had the chance to write various books. Hong Kong Arts Festival nance institution. Back in March, In short – I was always able to do things Credit Suisse also launched private that I enjoyed. Credit Suisse and the Hong Kong banking operations in Mexico. One Don’t you perhaps hold too Arts Festival (HKAF) have entered of the new unit’s main objectives is into an exclusive three-year partner- to support wealthy individuals and many voluntary posts? ship, which will see Credit Suisse their families, entrepreneurs, as These commitments are important, and stand as the title sponsor of HKAF’s well as medium- and large-family we see them as part of our social respon- first-ever Emerging Artists Series. business owners. “Mexico is one of sibility. Of course, it’s not fun to have to The Credit Suisse Emerging Art- the world’s fastest-growing private spend my Sunday afternoon doing prepa- ists Series comprises performances wealth markets, with annual growth by some of the most impressive rates of approximately 9 percent,” ration work for the monthly meeting of young talents representing different says Jorge Rodriguez, head of the council of the University Hospital Zurich. art forms. These featured artists Domestic Private Banking Mexico. It means sacrificing other things in life. have launched their career on inter- Then again, life is all about weighing up and national stages and attracted the interest of international audiences. balancing out various possibilities. There This year, the series showcased are only 24 hours in a day. And I think a man- bass-baritone Shenyang, who ager has to be aware of this fact too. was the BBC Cardiff Singer of the I’ll also probably be giving up certain posts World 2007; Trey Lee, who was the winner of the Elle Style Awards and taking up new ones. Daniel Huber Musician of the Year 2007; and Dick Wong, renowned Hong Kong contemporary dance choreogra- pher. “We are very proud to be supporting the HKAF and, in particular, its efforts to provide a platform Ready for the clients: Jorge Rodriguez, for gifted emerging artists to show- head of Domestic Private Banking case their talent in such an inter- Mexico, surrounded by parts of his nationally renowned event. This team. partnership reflects Credit Suisse’s sponsorship philosophy, which recognizes the importance of nurturing young artists as the key to maintaining cultural diversity in the future,” said Kai Nargolwala, Credit Suisse’s Asia Pacific Chief

Executive Officer. Photos: Jean-Marc Mähr | Russell Monk | Credit Suisse

Bulletin 2/09 Credit Suisse Credit Suisse 33

participants’ practical needs. As Asian Investment an external credit-bearing diploma awarded by the highly respected Conference 2009 CUHK, it also offers the possibility of continuing onto an MBA which The 12th Asian Investment is currently being developed by the Conference (AIC)2009 Credit Suisse Business School. attracted a record audience. More than 2,000 delegates, including 200 leading cor- Euromoney Award porate leaders, convened in Hong Kong between March Credit Suisse Awarded “Best 24 and 27 to showcase and Private Banking Services” discuss investment themes Credit Suisse’s private banking and opportunities facing the business in Singapore has been global economy, and the Asia recognized in March as having 3DFLƟFUHJLRQLQSDUWLFXODU “Best Private Banking Services The speakers of this edition Overall” by Euromoney magazine, a leading industry business publication. The award acknowledges Credit Suisse’s private banking business leadership in Singapore and the success of its integrated banking franchise. According to Euromoney, Credit Suisse’s top ranking for “Best Export Trade Is Switzerland’s Lifeblood Private Banking Services Overall” in Singapore indicates the excellent The Forum for Swiss Foreign Trade and Investment, organized by OSEC, quality of its services to high- and helps companies to analyze their situation and to network. Discussions ultra-high-net-worth individuals in at the forum initially centered on the topic of “Multinational SMEs: Global- these markets and reflects the Fan Gang addressing the AIC 2009. ization as an Opportunity.” Politicians, publicists and business decision- recognition of other private banks makers, such as Albert Baehny (Geberit), Rolf Sonderegger (Kistler), operating in the same region. featured a cross-section of Franziska Tschudi (Wicor) and Paul Bulcke (Nestlé), all had their say. In particular, Credit Suisse was global business leaders, A presentation by Nouriel Roubini from New York University’s Stern School awarded first place in the subcate- economists and government of Business was also received with particular interest. The topic “USA: gories of “Relationship Manage- RIƟFLDOVLQFOXGLQJ1REHO Opportunities and Obstacles” gave people even more to talk about, with ment” and “Offshore Services,” and Laureate Professor Joseph E. business personalities such as Marcel Hossli (Zimmerli), Uwe Krueger was also ranked among the top (OC Oerlikon), Thomas W. Jung (Acutronic) and Simon Michel (Ypsomed) three in Singapore in the majority Stiglitz of Columbia University, providing their opinions. Shaun Donnelly from the National Association of the 31 subcategories. Professor Fan Gang, director of Manufacturers, Martin Neville from the Swiss-American Chamber of the National Economic of Commerce, and David Plouffe, Barack Obama’s presidential campaign Research Institute in China, manager, also provided international insights. For a dossier with videos, and Jiang Jianqing, president visit www.credit-suisse.com/infocus > Swiss companies. and chairman at the Indus- trial and Commercial Bank of China. They spoke about Appointment Chinese University of Hong Kong WKHRXWORRNIRUWKH$VLD3DFLƟF region, highlighting the signs David Mulford Named Vice Inaugural Class Earn of an economic recovery. Chairman International Diploma in Global Finance Credit Suisse’s strategists David Mulford has been appointed On Thursday, February 19, 2009, echoed these comments, to the newly created role as Vice Credit Suisse held an inaugural underlining that their leading Chairman International, where he graduation ceremony for its 22 high- JOREDOFRQƟGHQFHLQGLFDWRUV will work with a range of clients performing graduates of the Credit are likely to turn in the coming across the integrated bank with a Suisse-Chinese University of months. The topics of the particular focus on governments, Hong Kong (CUHK) Professional panel sessions held ranged as well as corporate clients across Diploma in Global Finance at Clash of the Chess Titans: IURPƟQDQFLDOUHJXODWLRQ the globe. Mulford, who most the Suntec Singapore International Anand, Karpov, Kasparov, and Asian banks to Chinese recently served as the US ambas- Convention & Exhibition Centre. Korchnoi, Kramnik, Spassky, health care. sador to India, worked at Credit The CUHK Professional Diplo- Ponomariov, Topalov, Polgar. Suisse between 1992 and 2003. ma in Global Finance was launched Who will win? August 22–23, All keynote speeches and Mulford brings a depth of expe- in October 2007. The 15-month- 2009, in Zurich. panel presentations are rience and relationships spanning long program is aimed at high- www.sgzurich2009.ch more than 30 years in investment potential Credit Suisse employees available on video replay at banking and government services, in the Asia Pacific region. It is ex- www.credit-suisse.com/ working around the world in both clusive to the bank and tailor-made conferences/aic/2009/en/ developed and emerging markets. to ensure high relevance to the video_replays.html.

Credit Suisse Bulletin 2/09 34 Credit Suisse

23 Photos: Tracey Emin | Regina Recht, Visum Recht,Emin | Regina Tracey Photos:

Three by Tracey Emin: 1 “My Bed,” 1998, mattress, sheets, pillows, various personal objects, 79 x 211 x 234 cm, Saatchi Gallery, London. 2 “It’s Not the Way I Want to Die,” 2005, salvaged wood and metal, 310 x 860 x 405 cm, courtesy of the artist and Jay Jopling/White Cube, London. 3 “The Perfect Place to Grow,” 2001, mixed media: wooden beach hut, DVD (1’ 45’’), monitor, trestle, ladder, plants, dimensions vary, Tate, London. Purchased 2004.

Bulletin 2/09 Credit Suisse Credit Suisse 35

A Summer Without Culture Is No Summer at All We need culture more than ever in times of economic hardship: Credit Suisse’s partners in culture and the arts again promise to bring us many unforgettable experiences and encounters.

Text: Andreas Schiendorfer

Nietzsche once said that our greatest expe- a sensitive woman who can also be weak, and Museum of Fine Arts Berne riences were not the loudest ones, but our who can no longer have children. quietest moments. For sure, the coming Tracey Emin: This doesn’t mean that Tracey Emin has weeks and months will be ideal for visiting Retrospective of Superlatives become more conventional or gentler with museums. Museums are pleasantly cool and age, but it does force the viewer to realize how quiet, as many people will have headed for “You forgot to kiss my soul” – complex she is and that she is not to be the beach instead. And they’re exciting, too. quote as neon installation, 2001 thought of only in terms of “My Bed,” where Consider the Tracey Emin show at the Mu- the bloodstains have already started to fade. seum of Fine Arts Berne, or those of the artist “When I was born, Your mild irritation may be assuaged by hear- couples Yves Klein and Rotraut at the Museo they thought I was ing Matthias Frehner, director of the Museum d’Arte in Lugano, or Christo and Jeanne- dead.” That’s how of Fine Arts Berne, affirm: “Tracey Emin is Claude at the Hermitage in Lausanne. Tracey Emin starts one of the 20 most important artists of the The appeal of composed silence is undeni- her autobiography, 20th century. She has set new standards.” able (see page 7), but those who attend one “Strangeland.” She When she was shortlisted for the 1999 of the classical music festivals are more ends it with the sen- Turner Prize, she exhibited her bed in the Tate likely to experience this enriching stillness tence, “Don’t be afraid to take the past head Gallery, complete with dirty underwear, used internally after the concert, as they reflect, on.” In between is the artist’s life, divided into condoms and whisky bottles, triggering one replay and re-listen to what they’ve heard, in Motherland, Fatherland and Traceyland. The of the most controversial debates on modern an amphitheater like that of Avenches, in the style is never literary; the third section is art. For her it’s not about sex, which sells well cloister courtyard of St. Gallen or the bastion even vulgar in the extreme, just the way life enough, but about ruthlessly examining her of Solothurn. treated Tracey. At 13 she was raped. She own existence. And she does so with a rare Among the highlights of this season is dropped out of school, and for years her life candor, which is not confessional in nature the Salzburg Festival, with the opera “Al gran revolved around sex, drugs and abortions. but comes naturally to her as a twin. Tracey sole carico d’amore” by Luigi Nono, and the She lived in Margate, on the east coast of Emin thus hit the nerve of the millennium Lucerne Festival. Here we should also men- England, which she can also look back on society 10 years before Facebook. tion a solo concert by Andriy Dragan, winner with some positive associations. “The Perfect Her art is great because it is extremely of the Prix Credit Suisse Jeunes Solistes, Place to Grow” (photo 3) is not meant sarcas- authentic and emotional, even though she who will be playing a program of music by tically; instead it expresses a sense of secu- thinks in words rather than images. She de- Béla Bartók, Franz Schubert and Sergej Pro- rity amid all that existential angst. Margate, scribes how she starts each new piece with kofjev on Tuesday, August 25, at 12 :15 p.m. with its Hotel International, and London, a kind of thesis or statement. She doesn’t just in the Casineum of Lucerne’s Grand Casino. that’s home for her. Everything else – despite sit around and ponder, she constructs things. a holiday house in Australia and friends in A lot of people, she says, don’t consider what Scotland – is unbearable exile. she does as art, especially the embroidered Ambivalent feelings abound as you walk covers, which they see as mere design or through the exhibit, assembled by Kathleen handicrafts. But for Tracey Emin it is most Bühler. You think you should be feeling shock GHƟQLWHO\DUW or disgust, but you don’t. Tracey Emin’s works Because people have said so many absurd are meant to shake you up, but they are aes- things about her, she now has her own Web thetically also appealing. Especially her draw- site: www.tracey-emin.co.uk. It’s worth a ings of birds, which although they may not visit – and a trip to Berne even more so. have especially great artistic merit, are quite Tracey Emin. 20 Years. touching as they reveal another Tracey Emin: Museum of Fine Arts Berne. >

Credit Suisse Bulletin 2/09 36 Credit Suisse

1, 2 John M Armleder. “Crystal Column,” Credit Suisse’s Lugano branch, Piazza della Riforma, 2009: height 17.705 m, weight 1,600 kg, 378 glass tubes and 40,356 light-emitting diode (LED) lights. 3 Light show by Credit Suisse to mark the opening of the Picasso exhibition at the National Gallery in London.

Bulletin 2/09 Credit Suisse Credit Suisse 37

together with his partner Sylvie Fleurie and Arts Agenda: Abroad Credit Suisse’s Lugano Branch his son Stéphane Armleder, he founded the John M Armleder: Geneva record label Villa Magica Records. Museums “Crystal Column” Creates Now he can pursue his wide-ranging inter- a Complex Play of Light ests more easily. National Gallery London Picasso: Challenging the Past John M Armleder. “Crystal Column.” :KDWLQƠXHQFHGLGWKHROGPDVWHUVKDYH John M Armleder’s Credit Suisse Lugano, Piazza della Riforma. on Picasso? Interest in 20th-century artwork at Credit art kindles an interest in European painters Suisse’s remodelled of the past. Until June 7. EUDQFKRIƟFHRQ/X www.nationalgallery.org.uk gano’s Piazza della National Gallery, London Salzburg Foundation Riforma combines Christian Boltanski: “Vanitas” new technologies with Pablo Picasso: Competing The 64-year-old Frenchman has created the the glassmaking traditions of Murano: over- With the Old Masters eighth work in the Salzburg Foundation’s 10-year project: “Vanitas,” a light sculpture for laying light-emitting diodes (LEDV ZLWKƟQHO\ the medieval crypt next to the cathedral. textured crystal tubes. He also calls attention Virtually no artist has Inauguration July 24. to the meaning and function of light as art made such an impact www.salzburgfoundation.at and as utilitarian object. The “Crystal Column” on the 20th century Shanghai Museum is a work of art, but at the same time an im- as Pablo Picasso www.shanghaimuseum.net/en portant element in the architectural lighting (1881–1973). The concept. Spanish painter, de- Singapore Arts Museum www.singart.com Improving lighting conditions was in fact an signer and sculptor HVVHQWLDOFRQFHUQGXULQJWKH\HDUVWKHRIƟFHV was extraordinarily innovative. So it may come Taipei Fine Arts Museum were under renovation. The architects Giraudi as a surprise to hear that Picasso was not www.tfam.museum Wettstein responded to the existing, rather trying to make a radical break with the old dark lighting in the rooms by opening up the masters, but in fact owed a lot of important Music and Dance ceiling in the center of the building to admit ideas to them. “Picasso was thoroughly fa- QDWXUDOOLJKWDVIDUGRZQDVWKHJURXQGƠRRU miliar with the western tradition of painting, Salzburg Festival The theme of this year’s Salzburg Festival, 7KHQHZOLWVSDFHLVGHƟQHGE\DJODVVVWUXF- because he began visiting museums when he from July 25 to August 30, is “The Game ture composed of displaced squares of vari- was still a child,” explains Christopher Rio- of the Mighty.” Once again, around 200 events RXVVL]HVH[WHQGLQJWKURXJKDOOWKHƠRRUV pelle, curator of the exhibition “Picasso: Chal- of the highest caliber will be presented. Armleder called it the Atrium Chimney and lenging the Past” at the National Gallery in Credit Suisse’s traditional get-together with media representatives and guests will take set up his 17-meter-high “Crystal Column” London. “As a young man, he confronted this place on August 2, before the premiere as a counterpart. Rising toward the sky, the WUDGLWLRQDQGLWVLQƠXHQFHRQKLP

Photos: Dirk Altenkirch, Karlsruhe | Bill Robinson | Willy Spiller, SI, RDB | Bettmann, Corbis land at the Biennale in Venice. In 2004, >

Credit Suisse Bulletin 2/09 38 Credit Suisse

Arts Agenda: Switzerland F. Weibel, chairman of the Zurich Summer Zurich Opera House/Zurich Summer Festival Festival. He also mentions other highlights, Ruben Drole as Guglielmo such as the awarding of the Zurich Festival Festivals Prize to the theatre director Peter Stein and Avenches Opera Festival “I can express the music in the homage to the composer Felix Mendels- July 3 to 17 me much better with my voice sohn – who was born 200 years ago – by the www.avenches.ch than with my violin.” Tonhalle Orchestra Zurich. $VWKHWLPHIRUƟQLVK- Davos Festival “Così fan tutte,” Zurich Opera House. July 25 to August 8 ing high school ap- Premiere: June 28 at 6:30 p.m. www.davosfestival.ch proached, it looked Performances: June 30, July 2, 4, 7, 9 and 11. Lucerne Festival very much like Ruben August 12 to September 19 Drole would be going www.lucernefestival.ch to study medicine or Salzburg Festival Classic Openair Solothurn law. Although like his June 30 to July 11 father he played the violin, he didn’t have Luigi Nono: “In the Bright Sun www.classic-openair.ch quite what it took to aspire to a serious ca- Charged With Love” St. Gallen Festival reer in music. All the same, after a successful June 26 to July 10 performance with the Winterthur high school The artistic director of www.stgaller-festspiele.ch FKRLUKHƟQDOO\JDYHLQWRWKHLQVLVWHQWGH- the Salzburg Festival, Zermatt Festival PDQGVRIKLVPXVLFWHDFKHUDQGWRRNKLVƟUVW Jürgen Flimm, has September 4 to 20 singing lesson at age 19. He had never been described Luigi No- www.zermattfestival.com to the opera. But then things started moving no’s opera “Al gran quickly: Seven years later, in 2005/06, he sole carico d’amore” Zurich Summer Festival June 19 to July 12 was accepted into the ensemble of the as the high point of www.zuercher-festspiele.ch Zurich Opera House. this year’s program, despite a playlist that “Singing is easy for me,” Drole says. “I can includes Mozart’s “Così fan tutte” and “Le Museums use my voice to express the music I’ve always Nozze di Figaro,” Beethoven’s “Fidelio,” Ros- felt inside me so much better than with the sini’s “Moïse et Pharaon,” Händel’s “Theo- Museum of Fine Arts Berne violin. I feel free.” But he’s not really. The en- dora” and Haydn’s “Armida.” This opera is Tracey Emin. 20 Years semble’s schedule is so packed and demand- basically “a great requiem for lost hope and Until June 21 www.kunstmuseumbern.ch LQJLWŒVQRWXQXVXDOWRKDYHƟYHQHZSURGXF- doomed utopias.” It expresses the “constant tions per season, and Drole is almost always female presence in life, combat, love, yester- Fondation de l’Hermitage Lausanne venturing into new musical territory. Still, he day, today and tomorrow, linked together Christo and Jeanne-Claude. Over the River, A Work in Progress retains a sense of ease, and the extraordinary by anticipation and fragmentation, from the Until May 24 beauty, suppleness and charisma of his voice. Cuban revolution to the Soviet revolution of www.fondation-hermitage.ch He also has a strong stage presence and is a 1917, from the Russian revolution of 1905 Museo d’Arte Lugano promising actor. Nikolaus Harnoncourt and to the Paris Commune and the Italian re- Yves Klein & Rotraut Martin Kušej recognized this in February sistance.” Certainly, this collage-like “azione May 16 to September 13 2007 when they cast this multitalent for scenica” from 1975 is one of the great mas- www.mdam.ch the role of Papageno in “The Magic Flute.” terpieces of modern musical theater. Fondation Pierre Gianadda Martigny Mozart roles seem in general to suit the young Luigi Nono (1924 –1990 ) came from a De Courbet à Picasso baritone/bass. The next was Figaro, then family of Venetian painters and married June 19 to November 22 Guglielmo. “It was as if the role of Guglielmo Arnold Schönberg’s daughter, Nuria. He www.gianadda.ch was tailor-made for Ruben Drole: His voice is joined the Communist Party in 1952. He be- Kunstmuseum Winterthur like balm, his legato is impressive, and his gan as a leading exponent of the new serial www.kmw.ch diction and rhythm are meticulous,” says Der music of the Darmstadt school, then used Neue Merkur magazine in its review of his tape recordings in exploring concepts of time Zug Art Gallery Roman Signer “Così fan tutte” with Zsolt Hamar as musical and space, later adding experimental pro- August 30 to November 22 director and staged by Jürgen Flimm. At the cesses with live electronics. Toward the end www.kunsthauszug.ch Zurich Summer Festival, “Così fan tutte” will of his life, he focused on works for chamber Kunsthaus Zurich EHWKHƟQDOZRUNLQWKH0R]DU WWULORJ\RI)UDQ] ensembles. Welser-Möst and Sven-Eric Bechtolf. “The Georges Seurat Luigi Nono. “Al gran sole carico d’amore.” October 2, 2009, to January 24, 2010 premiere on Sunday, June 28, will also be Premiere: August 2, 8:30 p.m. www.kunsthaus.ch exciting because the seasoned Zurich Mozart Additional performances: August 6, 9 and 14. Museum Rietberg Zurich ensemble will be joined by two new voices, www.rietberg.ch Anna Bonitatibus as Dorabella and Javier

Camarena as Farrando,” explained Peter peitschphoto.comPeitsch,DahindenRittershaus | Peter | MonikaMarcSchwiertz | SuzannePhotos:

Bulletin 2/09 Credit Suisse Credit Suisse 39

1 Movement choir from the opera “Armida” by Joseph Haydn. Performance at the 2007 Salzburg Festival. This successful opera will be presented again on May 31 to mark the 200th anniversary of the composer’s death. 2 Annette Dasch as Armida and Michael Schade as Rinaldo. 3 Ruben Drole as Guglielmo in Wolfgang Amadeus Mozart’s “Così fan tutte.” Zurich Opera House, April 2008.

Credit Suisse Bulletin 2/09 40 Credit Suisse

right now, investors will put their money A Regional Perspective primarily into more straightforward, more conservative, liquid products, and will wait On the Financial Crisis several months before venturing back to PRUHFRPSOH[LQVWUXPHQWV&RQƟGHQFHLQWKH Each culture has its own response to crisis. As a global enterprise, banks themselves has suffered far less than Credit Suisse is confronted with these differing client, investor and employee in other countries. “In Switzerland, banking mentalities every day. has traditionally been one of the pillars of society,” Cerjak notes. Although the loyalty of employees and clients alike may have been tested at times in recent months, “as far as I can tell, the crisis has brought employees in Switzerland closer together.” 0DQ\VRFLHWLHVƟQGLWGLIƟFXOWWRDFFHSWEXVL- from this risk paper to limit their losses. “We’ve The US: A Land of Contrasts ness failure. Once successful people see seen a lot of capital moved to Hong Kong and their misfortune as a tragedy, and initially Singapore over recent months.” Künzler is The US have the largest markets in the world respond by sinking into despair. English- FHUWDLQWKDWWKLVZDVSURPSWHGƟUVWDQGIRUH- for both government bonds and high-risk, speaking cultures, meanwhile, are generally most by the state guarantees that these ter- high-interest bonds. As such, the US enjoy more willing to look upon failure as an op- ritories offer. a culture that combines both high risk and portunity to draw lessons for the future from absolute security. Yet understandably, even Institutional Independence Is Important the US seem to have lost their appetite for “Everything to do with $UDWKHUGLIIHUHQWYLHZRIWKHƟQDQFLDOFULVLV risk for now. “We have seen major portfolio chance and risk has always can be observed in Russia. Although high reweightings, and our trading volumes in held a certain appeal.” losses in some sectors have resulted in an February were 15 percent up on last year,” Martin Künzler understandable aversion to risk among inves- says Silvan Wyss, Private Banking COO tors, “the current crisis is practically a storm Americas. Risk is being reassessed, and past mistakes. “Where a culture allows fail- in a teacup for one of the most important investors are often favoring products that ure, those who are affected tend to respond groups of investors, Russia’s oligarchs,” offer security. “On the other hand, some much less emotionally, and they continue to says Michael Richard Vlahovic, Private Bank- investors believe that opportunities are be accepted by society,” observes Nannette ing Russia, Eastern Europe, Central Asia. reemerging, so we are experiencing resur- Hechler-Fayd’herbe, host of the “Culture While the share price collapse on the Moscow gent interest in distressed funds, in private Watch” staff event. This is just one of many stock exchange has been severe “compared equity and even in buy-out funds. In addition examples of how cultural background can with the great currency crisis of 1998, the to expertise from their advisor, the most im- affect the way people feel and behave in danger has not yet reached existential pro- portant consideration for American investors certain situations. portions.” The most important thing for in- and clients is a well-positioned, financially vestors now is close contact with their advi- sound bank.” Teva Streich Asians Look for Balance sors. “Clients want to hear ideas from their Although “Asian” culture encompasses many bank,” Vlahovic emphasizes. The indepen- different regions and mentalities, there is GHQFHRIWKHLUƟQDQFLDOLQVWLWXWLRQLVDOVRYHU\ much common ground. Many Asians, for ex- important to Russian investor confidence. DPSOHKDYHDSDUWLFXODUDIƟQLW\IRUJDPHVRI “The Russians have had bad experiences with chance. “Everything to do with chance and state-run banks in the past.” risk has always held a certain appeal,” says Patience and a Great Need for Security Martin Künzler, head of Key Clients Asia 3DFLƟF2IIVKRUH

tors had to act fast and withdraw their money vant, personal advice. Cerjak believes that, diversity. Photos: Marcel Bodenmann | Lyceum Alpinum Zuoz

Bulletin 2/09 Credit Suisse Credit Suisse 41

Credit Suisse, which also sets great store Education: Switzerland’s by the development of young talent, offers around 1,200 traineeships (see page 48). Most Important Commodity Over the past few years, the bank has also been strengthening its contacts with ex- Private education institutions such as Le Rosey, Lyceum Alpinum Zuoz and cellent Swiss private schools at various levels. Aiglon College in Villars make a big contribution to the outstanding quality of The top-achieving school leavers from Le Swiss schooling. Rosey in Rolle receive the Prix d’Excellence, which not only includes a Girard-Perregaux ZDWFKEXWDOVRDƟYHGD\WUDLQHHVKLSDW Credit Suisse. “The support I received from the great team at Credit Suisse Gstaad helped me to understand what a complex organization a bank really is,” stated Monika Wilk from Poland, the 2007 prize winner who now studies at the London School of Economics. 6RƟD%ODQFR6DQWRVZLQQHURIWKH2008 prize, is following an entirely different career path and currently studies architecture in Madrid. Nevertheless, the 100,000 or so pupils from over 100 countries who attend Switzerland’s 260 private schools not only EHQHƟWIURPDKROLVWLFDSSURDFKWRVFKRROLQJ but also from broad social experience. “Rosey is a really special school, because you live

12and learn with the other pupils and the teachers as well, which creates a multicultural, IDPLO\DWPRVSKHUHŕHPSKDVL]HV6RƟD%ODQFR Santos. “I made some of my ver y best friends here. Friendships I know will last all my life. I was very happy here.” The same also applies to school leavers at Lyceum Alpinum Zuoz, where Credit Suisse last year helped to implement the school’s motto, “mens sana in corpore sano,” in a very special way. Over two days, the “Invest in Your Future” initiative, run by Credit Suisse St. Moritz together with the University of St. Gallen, offered pupils the chance to be a banker for the day, and to work on important 3 soft skills such as teamwork and leader- 1 6RƟD%ODQFR6DQWRVLQIURQWRI/H5RVH\ŒV*VWDDGZLQWHUUHVLGHQFH 2 Students at the Aiglon College in ship. Another high-performance highlight Villars study the solar system during the International Year of Astronomy 2009. 3 Located near St. Moritz, was the Pro-Am golf tournament, held the Alpinum Lyceum Zuoz is one of Switzerland’s most renown private schools. under the motto “Invest in Your Handicap,” in which the best Swiss golfer of all time, Paolo Quirici, also took part. A third example of this commitment to young talent is Aiglon College in Villars, which was founded by the Englishman John C. Cor- lette following World War II and now is run by Peter Armstrong. The college is celebrating its 60th anniversary from July 1–4 this year and Credit Suisse will be taking part in the festivities. schi

Credit Suisse Bulletin 2/09 42 Credit Suisse

Masthead

Publisher Credit Suisse P.O. Box 2 CH-8070 Zurich Telephone +41 44 333 11 11 Fax +41 44 332 55 55

Editors Daniel Huber (editor-in-chief, dhu), Marcus Balogh (mb), Dorothée Enskog (de), Regula Gerber (rg), Mandana Razavi (mar), Andreas Schiendorfer (schi), Valérie Clapasson Fahrni (vcs), Michael Krobath (mk), Teva Streich (tst)

E-mail [email protected]

Contributors to this issue Elke Bunge, Eric Güller, Janine Händel, Ulrich Kaiser, Giles Keating, Steffen Klatt, Matthias Meili, Ingo Petz, Alexandra Pilton, Matthew Rees, André Rogger, Robert Ruttmann, Susan Sy

Internet www.credit-suisse.com/infocus

Marketing Veronica Zimnic (vz)

Proofreading text control, Zurich

Translations Credit Suisse Language Services

Design/Layout www.arnold.inhaltundform.com: $UQR%DQGOL0RQLND+¦ƠLJHU3HWUD6LHJHQWKDOHU Petra Feusi (project management)

Advertising Daniel Baer, Nübruchweg 22, 8605 Gutenswil, Klodin Erb (born 1963 ), untitled, 2008, oil on canvas, 220 x 180 cm. Telephone +41 44 945 38 85, [email protected] Credit Suisse collection. Exhibited at Credit Suisse Lugano, Piazza della Riforma, 1st Upper Floor. &HUWLƟHG:(0)FLUFXODWLRQLQ 148,050

ISSN registration ISSN 1662-2

Printing Ebullient Art in Lugano NZZ Fretz AG /Zollikofer AG

(GLWRULDOFRPPLWWHH Already from the outside, from the Piazza della Riforma, John M Armleder’s René Buholzer (Head of Public Policy), Monika Dunant almost 18-meter tall, gleaming “Crystal Column” draws the viewer into the new (Head of Communications Private Banking), Urs P. Gauch (Head of Corporate Clients Switzerland – Large Corporates), Lugano branch (see page 36). This Murano glass sculpture in the atrium is )ULW]*XWEURGW +HDGRI&KDLUPDQŒV2IƟFH $QJHOLND-DKQ surrounded by works of other Swiss artists from the Credit Suisse collection. (Investment Services & Products), Martin Lanz (Economic Research), Hubert Lienhard (Asset Management Distribution Displayed in 16 client meeting rooms, they take up the theme of Armleder’s Services), Andrés Luther (Head of Group Communications), FU\VWDOFROXPQŏWKHVROLWDU\JORZWKHUHƠHFWLRQVWKHOLJKWUHIUDFWLRQVŏ Charles Naylor (Head of Corporate Communications), Christian Vonesch (Head of Private & Business Banking Aarau) and express it in other forms. Klodin Erb’s double portrait, for instance, has WK\HDURISXEOLFDWLRQ something of the old master about it. A woman in an evening dress sleepily (5 issues per year in English, German, French and Italian). sinks back, supported gently by a second woman. The oil paints lend the scene Reprinting of texts permitted with acknowledgement of source (“Credit Suisse Bulletin”). a volatile presence: Positioned between vibrant red stripes in the foreground – Changes of address VWDLUVSHUKDSVŏDQGDMXVWDVLQWHQVLYHO\UHQGHUHGFORXGƟOOHGVN\WKHWZR 3OHDVHVHQGQRWLƟFDWLRQLQZULWLQJDFFRPSDQLHGE\WKHRULJLQDO ƟJXUHVPHHWLQPLGSLFWXUH%XWZHDUHGLVWUDFWHGIURPWKHPRWLI$WWKHKHDUW envelope, to your Credit Suisse branch or to: of the scene is a raging cyclone of loose, free brushwork whose focus is the Credit Suisse, ULAZ 12, P.O. Box 100, CH-8070 Zurich.

sleeping woman’s throat, brightly lit and of swanlike slenderness. This stabiliz- This publication is for information purposes only. It does not ing element is encircled by a baroque opulence of color, and there are numer- constitute an offer and is not a recommendation by Credit Suisse to buy or sell securities. Indications of past performance ous subtle tensions within the dense composition. For instance, the large, are no guarantee of a positive performance in the future. The VPDUWKDQGEDJRIWKHUHFOLQLQJƟJXUHHFKRHVWKHIRUHJURXQGVWULSHVOHDYLQJ analysis and conclusions contained in this publication were established by Credit Suisse and may already have been used it wonderfully unclear whether we are looking at a reflection of the red for transactions by Credit Suisse Group companies prior to foyer steps – if that is what they are – or at the textile pattern of the bag itself. being made known to clients of Credit Suisse. The opinions expressed in this document are those of Credit Suisse at the For more information, visit www.credit-suisse.com/sponsoring > Art > time of going to press. (We reserve the right to make amendments.) Credit Suisse is a Swiss bank. Collection Credit Suisse. André Rogger, Art Unit Photos: Courtesy of Galerie Rotwand, Zurich | Committee Encouraging Corporate Philanthropy(CECP) | Swisscontact

Credit Suisse Bulletin 2/09 Credit Suisse 43

Zurich. The film gives experts Aid to Developing Countries like Nestlé’s Chairman Peter Bra- Swisscontact – 50 Years beck and the Peruvian economist Of Development Aid to SMEs Hernando de Soto a chance to have their say (see also leader Swisscontact – the development article on page 62 et seq). organization funded and run by Swiss private industry – celebrates its 50th birthday in 2009. The %XVKƟUHV foundation operates under the mot- to “Helping people to help them- Donations for Victims selves” and provides job-related 2IWKH%XVKƟUHVLQ$XVWUDOLD training and education in more than 20 developing countries and in In mid-February, the state of Eastern Europe. It also supports Victoria in southern Australia suf- the development of small and fered the worst bushfires in the medium-sized enterprises (SMEs) country’s history. The fires de- and programs to protect the envi- stroyed 1, 8 0 0 houses, killed more ronment. The Swisscontact Senior than 180 people, and left around Expert Corps, yet another service, 7,000 people homeless. This trig- provides retired specialists who gered a wave of sympathy across act as voluntary advisors. the country, including from Credit Credit Suisse has supported Suisse employees in Australia International Corporate Philanthropy Day the work of this charity since its and the entire Asia Pacific region foundation. “Against the background (APAC). The branch offices in of our global initiative to promote Sydney, Melbourne, Singapore Social Responsibility microfinance we are supporting, and Hong Kong – as well as some branches in China – organized February 23, 2009, was International Corporate Philan- special events to collect money for thropy Day. Robert Shafir (pictured above), CEO of Asset the victims, raising more than Management and the Americas region, together with more 73,000 Swiss francs ( 93,000 Aus- tralian dollars). Impressed by than 60 other CEOs and board members from some of these efforts, Kai Nargolwala (CEO the world’s biggest companies, took part in a conference of the APAC) and David Trude under the banner “Global Leaders: Confronting a Crucial (country head of Australia) added Decision.” The conference was organized by the Com- to the private contributions in mittee Encouraging Corporate Philanthropy (CECP) in the name of the Credit Suisse Asia Pacific Philanthropy Committee. New York. The CECP is an international forum that encour- Credit Suisse Group’s Disaster ages businesses to improve levels of social responsi- Relief Fund also made a substantial bility. Emphasizing Credit Suisse’s commitment to philan- for example, the education of young donation. More than 164,000 thropy, Rob Shafir explained during a group discussion: financial specialists in Ukraine Swiss francs ( 209,000 Australian (see picture) and improving access dollars) were eventually donated “Across our entire bank, we play an active role in the to financial services for SMEs to the Australian Red Cross. communities in which we live and work through regional in South Africa,” says Christian Gut, corporate philanthropy.” In a video message at the end Credit Suisse’s representative on Swisscontact’s Board of Trustees. of the event, former US President Bill Clinton reiterated Client Foundations the importance of strategic corporate philanthropy ini- The high point of this very special year is a public event with Client Foundations – tiatives. Shafir added: “However, we could not make mean- Federal Councilor Doris Leuthard, 136 Projects Supported ingful contributions without the help of our employees. which will be held on August 20, The voluntary work carried out by Credit Suisse employees 2009, in Zurich. In 2008, Accentus, Symphasis PDNHVWKHFRPSDQ\ŒVƟQDQFLDOFRQWULEXWLRQDOOWKHPRUH www.swisscontact.ch and Empiris – the three charitable client foundations founded by valuable. It is a privilege to have employees who play Credit Suisse – financed philan- an active part in our programs.” To mark International Cor- thropic projects to the tune of Documentary Film porate Philanthropy Day, Credit Suisse has entered into several million Swiss francs thanks a new global partnership with two charity organizations: “Beyond a Dollar a Day” to the generosity of their donors. They supported a total of 13 6 proj- Habitat for Humanity International and JA Worldwide®. More than a billion people survive ects, primarily in humanitarian Marcus Balogh on less than a dollar a day. In and scientific areas, but also in his documentary film “Beyond a culture, sports, nature and the Dollar a Day” Credit Suisse Board environment. Credit Suisse bears member David W. Syz looks at the administrative costs of running the question of how big a role entre- the three foundations, thereby preneurship can play in combating enabling the vast majority of do- such poverty. “What developing nated funds to go directly to the countries need is investment,” good causes chosen by the donors. explained Syz at the screening in Valérie Clapasson Fahrni

Credit Suisse Bulletin 2/09 44 Credit Suisse

Forced to Build a Future on Rubble In May 2008, a powerful earthquake destroyed large parts of China’s Sichuan province. More than 80,000 people lost their lives. Fast, effective aid was needed. The emergency relief work initially provided is now completed. Has it proved its worth? Is further cooperation, aiming at stabilizing the situation in the region, being considered by Credit Suisse’s Disaster Relief Fund?

Around five million people lost their homes following the May 5, 2008, earthquake. Containers protect them from the sun and the rain. But the camps are a long way from work and school. It will be years before the people can return to their village or city.

Bulletin 2/09 Credit Suisse Credit Suisse 45

Lying at the heart of the province of Sichuan, the metropolis of Chengdu is a perfect example of the Chinese economic miracle. The city is buzzing, businesses are in overdrive, and construction and expansion are every- where to be seen. There is nothing to remind the visitor that less than six months ago this region suffered the worst natural disaster in its history. On May 5, 2008, at precisely 2:28 p.m., the entire province was shaken by an earthquake measuring 7.9 on the Rich- ter scale. The effects could also be felt in

Chengdu, some 95 kilometers from the epi- 12 center. Its skyscrapers began to sway omi- nously as people ran for their lives in panic. Transportation systems collapsed, and the air- port was closed for 24 hours. It took several days to gauge the huge scale of the disaster and bring it home to people in the world beyond the epicenter. More than 80,000 per- ished, a majority of them children, with an- RWKHUƟYHPLOOLRQUHQGHUHGKRPHOHVV

White and Blue Container Villages

Drive just 30 minutes out of Chengdu, and evidence of the earthquake becomes more apparent. Building debris piles up like open wounds. The closer you get to the epicenter, 3 the more often you come across the charac- 1 Today, the small city of Han is a horrific place. 2 The church clock serves as a permanent reminder teristic container villages that offer temporary of the fatal moment when the earthquake struck. 3 Heavily affected by the earthquake, the Wenchuan valley is extremely narrow; the roads have been temporarily repaired, but are overused and dangerous accommodation to a population driven from due to heavy reconstruction traffic. their homes. The lines of white huts, with their blue roofs, extend as far as the eye can see. They will remain home to millions of people for many years to come, until such time as their villages and towns are rebuilt once again. It’s then on into the small city of Han, 35 kilometers from the epicenter. Once an idyllic settlement at the foot of a mountain, today it’s a scene of horror. The empty, damaged houses – numbering in their hundreds, and many in ruins – have an eerie look about them. The once densely forested local mountain Credit Suisse Disaster Relief 7KHƟUVWSURMHFWVWRUHFHLYH is now a barren, treeless desert landscape, support from Credit Suisse were in Sri Lanka and Indonesia where the ground threatens to slip away at in the wake of the 2005 tsunami. Attention was focused on any moment. The city’s residents have disap- SHDUHGKDYLQJƠHGSULRUWRWKHDIWHUVKRFNVŏ the construction of schools, school kitchens and libraries. driven out of homes that could no longer be Relief efforts also followed Hurricane Katrina and the Pakistan rebuilt. Like a memorial, the clock tower rises earthquake that same year. In New Orleans, Credit Suisse almost unscathed from the midst of the ruins. employees provided assistance on the ground. In 2008, the The large hands of the clock are stuck for- Myanmar cyclone and earthquake in Sichuan occurred at ever at 28 minutes past two. almost the same time – requiring solidarity on the part of Ghost Town Stands as Memorial &UHGLW6XLVVHDQGLWVHPSOR\HHV$OOƟQDQFLDODVVLVWDQFH Deeply shocked, we stand before the ruins comprises money from the Disaster Relief Fund as well as of a school. More than 400 students were donations from employees. In total, more than 10 million

Photos: Tom Grimmer buried by the collapsing walls. The > US dollars have gone into disaster relief in the past four years.

Credit Suisse Bulletin 2/09 46 Credit Suisse

1 2

3 4

1 Six weeks later and the children of Taoping were able to attend school again in a temporary installation made from containers – an important step toward normalcy. 2 Together with Oxfam Hong Kong, Credit Suisse built seven temporary schools. This shows the school in Taoping. 3 Due to the containers, the school yard is smaller than it was and the sports grounds are temporarily used for other purposes. 4 The reward for global solidarity: happy kids at play.

Bulletin 2/09 Credit Suisse Credit Suisse 47

quake struck in the middle of lessons. The to the deadly power of nature. At the point government is toying with the idea of leaving where the valley broadens out slightly, the city the ghost town as a memorial to those who of Yingxiu with its proud high-rises was once died. Reconstruction is impossible anyway home to 40,000 people: Now it’s a picture of due to the soft subsoil. The new city of Han total devastation. Lying at the heart of the is being built two kilometers to the west. epicenter, the earthquake left behind a landscape consisting of piles of building rubble. Planning a Future Built on Rubble What little remains of the walls bears testi- The journey continues toward the epicenter mony to the fact that people once lived here. through the narrow Wenchuan valley. The In their camps on the former city limits, erst- steep cliff face on either side is intimidating: while residents wait with admirable patience The mountain does not seem to have settled for something to happen – out of work, and in down just yet. Every now and again, the new- an inhospitable environment. ly built road – the lifeblood of the region and The city’s reconstruction has not yet built in record time – is buried beneath falls of started. Access roads take priority and re- The 10-year-old Jiang Zhu. debris. Road builders keep a watchful eye on quire the best brains in engineering. Many the crumbling valley sides, as they sporadi- residents would favor the reconstruction of Jiang Zhu Tells About Her Experience: cally wave the traffic through. The drive is the city at another location. But the narrow “I was in my dormitory in the school and closely akin to a game of Russian roulette. Wenchuan valley offers no option other was having an afternoon nap when the The old road on the other side of the valley is than building a future on top of the rubble. earth began to shake. The quake was so no longer recognizable: Barely a single bridge Yingxiu is scheduled to be completely rebuilt powerful that I woke up and ran out onto along the length of this 60-kilometer gorge in eight years. the sports pitch with the other kids. We can be repaired and reused. Along the way- had previously practised what to do when Janine Händel, head of Credit Suisse’s side, house-size chunks of rock bear witness Disaster Relief Fund something like this happens. That’s why I knew that I shouldn’t stay in the building. I then waited until my parents came A Temporary School for Taoping Together with Oxfam to collect me. I was a bit scared, actually. Hong Kong, Credit Suisse built a total of seven tem- Luckily, no one in our village was seri- porary schools in two regions of Sichuan province in ously injured. But some of the houses were in a terrible state. After the quake order to enable children affected by the earthquake to we had to stay home because our school get back to their desks as quickly as possible. Barely was damaged. That was weird – and bor- six weeks later, the children of Taoping were able to ing too. I really like going to school. I was move into their temporary accommodation. The primary glad when we were able to move into the school provides places for 263 students and 28 teach- new school containers. Now I can study ers, most of whom spend weeknights in small dor- again and hang out with my friends. Even mitories. The village’s mayor talks proudly of how the though we’re still short of school materials, I feel really happy in the school con- VFKRROZDVWKHƟUVWLQWKHHQWLUHUHJLRQWREHLQDXJX- tainers. I hardly think about the earth- rated after the quake. The school’s teachers then gave quake anymore. Jiang Zhu up their vacation entitlement, thus making up for all the delays in the teaching schedule. Occupation of the – now earthquake-proof – “old” school is slated for

Photos: Tom Grimmer the end of 2009.

Credit Suisse is convinced that corporate responsibility toward the environment and society at large is a key factor for economic success.

Credit Suisse Bulletin 2/09 48 Credit Suisse

of Directors, is testament to the high regard Developing Talent in which this initiative is held. More important as far as day-to-day working life is con- Is Especially Important cerned, however, are the regular monthly meetings and spontaneous communication, In a Crisis which is now far easier thanks to a dedicated in-house Web site. Credit Suisse will not be cutting traineeships in 2009 but will continue Networking or Cronyism? to offer successful trainees good career prospects. This was the message from Lukas Vonesch, head of Campus Recruiting Switzerland, on the “If, like me, you were raised in Zurich, earned occasion of the remarkable Next Generation Networking event, at which your degree in St. Gallen, and completed former Chairman of the Board of Directors of Credit Suisse, military service, then you’re bound to have Walter B. Kielholz, also participated. met a lot of busy, active people along the way,” a visibly chirpy Walter B. Kielholz tells his young audience. “I like people, I like talking to them and listening to what they’ve got to say. So relationships automatically develop that might prove useful in certain “The development of talent is not a short- who wanted to be able to exchange ideas situations. Insiders call these relationships term but a long-term undertaking, as the with their peers and benefit from the experi- networks, while those on the outside use the Executive Board and Board of Directors of ence of their older colleagues. The fact that term ‘cronyism.’” Credit Suisse are well aware,” underscored in three successive years the keynote speak- In a nutshell, the public debate on this Lukas Vonesch, head of Campus Recruiting ers at this major event were Walter Berchtold topic unfortunately suggests that we see Switzerland. “We will therefore continue to as head of Private Banking, Oswald J. Grübel something dubious in every network except offer the same number of traineeships for as Chief Executive Officer, and this year our own. At the same time, the experienced apprentices, interns and graduates of Walter B. Kielholz as Chairman of the Board financial expert warned against cultivating a secondary schools and universities, namely 1, 2 0 0 or so. And despite the squeeze on costs we will still be investing just as much in talent development in 2009.”

Eighty Percent Stay With the Bank

The large audience at the 2009 Next Gen- eration Networking event may have been pleased to hear this, but there was just one thing that they all really wanted to know: What would happen to those who were coming to the end of their training or had recent- O\ƟQLVKHG"Ŕ&UHGLW6XLVVHRIIHUVDOOLWV

Initiative as the Basis for Development

Talent development is most successful when employees learn to use their initiative and are willing to take charge of their own development. A good example of this is the NGN – the Next Generation Network – which was set up in 2004 by two Young Talents, Good networking often takes place during the breaks of an event. Walter B. Kielholz in an animated Michael Kocher and Michel Hugentobler, discussion with three of the NGN’s initiators.

Bulletin 2/09 Credit Suisse Credit Suisse 49

personal network solely for opportunistic reasons and constantly asking yourself if Credit Suisse Commits to someone might be useful to you. After all, there’s more to life than that. It’s important Clinton Global Initiative Asia for our own happiness that we keep up old friendships regardless of any career In December 2008, Hong Kong played host to the Clinton Global Initiative considerations. Asia. As part of this event, Credit Suisse in partnership with the United Nations (UN) World Food Programme (WFP) committed to provide a 250,000-dollar Economic Crises in the Recent Past philanthropy grant to sustain the WFP’s ongoing work in Indonesia. In his speech, Walter B. Kielholz looked back at the various crises that he had already experienced in the course of his Several hundred Asian leaders from a vari- professional career, starting with the oil ety of backgrounds gathered in support of crisis of 19 74, which really hit him hard as strengthening corporate social responsibility he was working for Switzerland’s third- in Asia under the auspices of the Clinton largest travel agency at the time, which Global Initiative (CGI) last December in Hong specialized in student travel, and the bottom Kong. At the core of the CGI is the “Commit- fell out of the market almost overnight. ment to Action,” a measurable pledge which Then – still fresh in his memory – came the translates goals into meaningful results. Swiss real estate crisis, when Swiss banks Since its conception, CGI members have suffered losses to the tune of 42 billion made nearly 1, 20 0 commitments, which have Swiss francs in domestic lending business impacted more than 200 million lives in 150 between 1991 and 1996, “mainly because countries. “Credit Suisse takes an active corporate clients were allowed to take out part in the CGI because it values the work excessive operating loans against real performed by our partner – the UN’s World estate,” Walter B. Kielholz explained. “No- Food Programme,” said Eoin O’Shea, Credit An Indonesian teacher hands out biscuits to school children, thanks to Credit Suisse’s philanthropy body considered that, if a business goes Suisse’s Chief Operating Officer in the Asia grant, to improve their concentration. bust, its commercial premises are of rela- Pacific region. “With the support of organiza- tively little value and should therefore be tions such as Credit Suisse, it is hoped that well as hygiene and health education, will assessed differently.” the CGI will continue to act as a catalyst for also be provided. “Such measures are crucial change in solving some of the world’s most to have a lasting impact for the children who Learning the Lessons pressing challenges,” said Anthony Banbury, receive this type of support at critical stages Walter B. Kielholz commented on the vari- regional director for the UN’s WFP in Asia. in their lives,” said O’Shea, who attended CGI ous crises from a very personal point of Asia. To ensure the sustainability of these Indonesian Educational Project view, which added an air of benevolent measures, WFP will work closely with local entertainment to the proceedings despite The 2008 edition of CGI Asia focused on three educational and health departments to the seriousness of the topic. In any case, key areas of discussion – education, energy ensure these messages are implemented looking back on past troubles in such a and climate change, and public health – dur- correctly. These important initiatives will lighthearted way can make mastering ing the two days of panel discussions and ultimately have a lasting impact on the lives current crises seem easier. It is important interactive working sessions. Credit Suisse’s of the children receiving support. not only to learn from the errors made, but “Commitment to Action” has been taken in Susan Sy and Alexandra Pilton also to make sure that the measures the area of education. The bank’s pledge, taken do not simply prepare the way for taken in partnership with the UN’s WFP, is a The Clinton Global Initiative the next crisis. commitment to provide a 250,000-dollar (CGI): Established in 2005, the philanthropy grant to sustain the WFP’s on- The Importance of Succession Planning CGI brings together global leaders going work in Indonesia. The objective of the to devise and implement solu- And, of course, the NGN has already passed commitment is to assist in the creation of a tions to some of the world’s most the acid test – the smooth handover from healthy learning environment and improve the pressing challenges. The CGI the founder members to the next genera- well-being and nutrition of over 9,000 school community also encompasses tion. Indeed, there is now a motivated team children and 384 teachers in one of the most CGI University, a forum to engage in place in order to make further aspects vulnerable school districts in Indonesia. college students in global citizen- of the vision a reality. If the initiative can be With the assistance of the grant, local rolled out beyond Zurich and the surround- school children will be nourished with micro- ship; CGI$VLDWKHƟUVWLQDVHULHV ing area, then the Next Generation Network nutrient-fortified biscuits throughout the of regional meetings; and My- event will be of enormous benefit to those day to strengthen and improve their concen- Commitment.org, an online portal who take part and to the company as a tration. Deworming treatments, interactive where anyone can commit to

Photos: Martin Stollenwerk | Barry Came, WFP whole. Andreas Schiendorfer learning tools and educational posters, as helping improve lives.

Credit Suisse Bulletin 2/09 wind power capacity installed worldwidewind installed power capacity energy plants. Energy Council Energy Council ( of it in the at the end of 2007 –more than half manufacturing rotormanufacturing blades for wind Figure there were 94,000 megawatts ( Picture According to the Global Wind Workers at firm Danish Vestas, EU countries. GWEC ) in Brussels, Brussels, in ) MW ) of

EU 57,000 MW Worldwide 94,000 MW

Fotos: Muster Mustermann | Muster Mustermann Renewable Energies Economy 51 Renewable Energy Becomes Big Business The renewable energy sector has not been immune to the world economic FULVLV$VLQRWKHULQGXVWULHVORDQVDUHSURYLQJPRUHGLIƟFXOWWRREWDLQ But driven by worldwide economic stimulus packages, the upturn could resume next year. Wind power has already grown out of its niche status, with solar energy set to follow.

Text: Steffen Klatt, specialist reporter, Abu Dhabi

Frank Mastiaux is working for the future of to have increased by 28 percent in 2008, on land. Meanwhile, densely populated the renewables industry. A chemist, he heads according to GWEC Secretary-General Steve Europe favors the open sea due to falling up E.ON Climate & Renewables – a subsidiary Sawyer. acceptance levels. In both cases, it will be of the energy giant based in Dusseldorf, huge wind farms that are involved – not Race Between Land and Sea Germany. Having in the past generated its simply a handful of wind turbines. electricity largely from fossil fuels and nu- A sign of maturity is the fact that in essence A similar development in favor of large- clear power, E.ON is now playing a leading the technology is already available. “There scale sites is under way in solar power. It, role in the industrialization of alternative will be further improvements, but probably too, began with small photovoltaic sites. But energy. “From boutique to big industry: that’s not any major technological leaps,” says the industry’s growth is now being driven our motto.” E.ON intends to concentrate on Ditlev Engel, chief executive of Denmark’s by larger-scale power plants. According to those energy sources that can already be Vestas – the world’s biggest manufacturer of Åsmund Fodstad, vice president at Norwe- produced on an industrial scale. That means wind turbines. The only question mark is over gian solar equipment supplier Renewable first and foremost wind energy, a little solar where the growth will take place: Will it be Energy Corporation, a total of 2,300 mega- power, very little energy from biomass and on land, or will it be at sea? Engel believes it watts of power plant capacity were installed practically none from geothermal. will be on land. “The fact is,” he says, “there worldwide in 2007. Solar systems for resi- are still huge areas available in the US, for dential buildings, on the other hand, grew by Over 100,000 Megawatts of Wind Power instance.” But René Umlauft – who as head only 590 megawatts, and systems for com- E.ON’s strategy is a reflection of today’s of Siemens Renewable Energy is Engel’s mercial buildings by a further 540 mega- reality in the field of renewable energies. As direct competitor – believes it will be the watts. By way of comparison, a reactor at an industry, wind power has come of age. At sea. Installation and operating costs are the Chernobyl nuclear power station had an the end of 2007, there were 94,000 mega- admittedly twice as high, and the cost of output of 1,000 megawatts. watts of installed wind power capacity ac- connection to the grid is actually four to five Difficult Year in 2009 cording to the Brussels-based Global Wind times as high. But these costs would fall Energy Council (GWEC). At 57,000 mega- further. “What’s more,” he says, “yields are In the long term, solar power is unlikely to watts, the EU accounted for the lion’s share. higher at sea.” Ultimately margins would have any problems catching up with and This means that 3.7 percent of the 27-member- even out, Umlauft told the Credit Suisse- overtaking wind energy. “On several levels, strong grouping’s electricity needs were al- supported World Future Energy Summit in solar power is more available than wind ready met from renewables. In global terms, Abu Dhabi at the end of January. In the end, power,” says E.ON’s Mastiaux. For the time installed capacity is now likely to have ex- both are likely to be right: For cost reasons, being, however, the financial crisis has ceeded the magic figure of 100,000 mega- large countries with a plentiful supply of slowed the rapid growth seen in renewables.

Photo: Jochen Eckel Jochen Photo: watts. This is because capacity is also likely wind – like the US and China – are focusing Miroslav Durana is the analyst responsi- >

Credit Suisse Bulletin 2/09 52 Economy Renewable Energies

Left Production workers at the Vestas plant in Lauchhammer, Germany, where rotor blades are manufactured. Right Towers for wind turbines being built by the firm Vestas RBB, a Danish-Indian joint venture, at the wind farm at Cape Comorin in India.

ble for Alternative Energies at Credit Suisse Competition between the suppliers to the inauguration speech, Obama didn’t make a Private Banking, expects growth in capacity solar industry is also growing. “Bosch’s entry special mention of wind and solar power for to range between only 12 percent and 15 per- into the market with Ersol is a signal that nothing,” says Sawyer. Meyer Burger’s Peter cent for 2009. Revenue expansion is likely companies with a different perspective on Pauli expects a political fillip too. “The eco- WREHHYHQƠDWWHUDWEHWZHHQ0 percent and industrialization are now moving in,” says nomic stimulus packages in the US and 10 percent. “2009 looks set to be a difficult Peter Pauli, chief executive of Meyer Burger, elsewhere will begin to take effect in the next year for renewable energies.” The reason a manufacturer of machines for cutting sili- 12 months – more quickly than we’ve ever here – as in other sectors – is the difficulty con, with its headquarters in Baar in the seen before.” in obtaining credit. Durana nevertheless ex- Swiss canton of Zug. “Other firms like LG in Meeting All Our Energy Needs? pects that this crisis will lay the basis for fur- South Korea are also entering the industry. ther growth. “The industry will consolidate. We will therefore see further consolidation.” At an international level too, politics now re- Only the sound businesses will survive,” he The cash-rich emirate of Abu Dhabi has flect the growing significance of alternative says. “For those companies, that will mean set up Masdar PV, a new manufacturer of energies. The end of January saw the setting the chance to continue growing strongly.” photovoltaic systems. The plant in Thuringia, up in Bonn of IRENA – the International Germany, is already under construction, with Renewable Energy Agency. Hermann Scheer, New Players in the Market a second, larger plant set to be built in the chairman of Eurosolar and a German Social Wind turbine manufacturer Vestas continues Gulf starting in April. Six hundred million dol- Democrat legislator, had campaigned for this to see itself as a winner. “Crisis” is a relative lars are being made available for phase one for 15 years. The agency’s task is to acceler- term for the sector leader, which hails from alone. The total could extend to two billion. ate the introduction of renewable energies. Jutland. “We had originally expected growth “The new agency will develop its own dyna- A Political Fillip of 40 percent in 2009,” says Ditlev Engel. mism,” says a hopeful Scheer, who is himself “We are still expecting 25 percent.” But oth- Despite the financial crisis, expansion of the being touted as a possible first secretary- er industry pioneers will find it tougher – even wind and solar power industry alike is set general of IRENA. The long-term objective if no observer will openly name names. On to continue. GWEC Secretary-General Steve is to meet all our energy needs from renew- the other hand, new players are set to enter Sawyer expects dynamic markets in Europe ables. This is an ambitious target, but a re- the market. Chinese firms, for instance, are and China. The fate of the US market, he alistic one. “If any energy expert disputes this, benefiting from the fact that their home mar- believes, depends in part on whether the he is either naive or a hyprocite,” says the ket is the most dynamic of the major wind banking system starts functioning again. pugnacious solar pioneer. < markets. In China, installed capacity is dou- “There is no shortage of goodwill on the part

bling every year. of the new administration,” he says. “In his Photos: Bernd Friedel,ecopix photo agency | Joerg Boethling, agenda

Bulletin 2/09 Credit Suisse Keating Economy 53 The Global Economy Is Changing – Creating Risks and Opportunities

Reinvigorating global banks with new capital is set to take a long time, as new losses emerge. So expect credit to stay scarce and expensive, further damaging the economy. Meanwhile, the global economy is changing rapidly. This creates major risks that can keep markets volatile and vulnerable for much of 2009, but can also create opportunities.

Text: Giles Keating, head of Global Research, Zurich

The world that gradually emerges from this certainties for investors, on top of the impact though aiming to exert pressure on costs, is crisis is likely to look very different from before. from the financial crisis itself. Alongside the also likely to eventually raise total spending In the two previous decades, the global econ- damage to banks and insurance companies, on health care substantially. omy was dominated by demand from credit- the outlook for American consumer goods Extreme Market Volatility Likely fuelled consumption in the US, the UK and companies and Chinese exporting manufac- certain other developed countries. Funded turers has changed out of recognition. Faced With the short- to medium-term uncertainty indirectly by instruments such as securitized with such a double shock of uncertainty, it of the banking crisis and the longer-term mortgages and built on a pyramid of leverage, is hardly surprising that investors have be- uncertainties of structural change, investors these consumers bought large quantities of come highly risk-averse, favoring cash and are in effect building in a very wide margin imported low-cost goods. highly liquid assets over equities and corpo- of error to the outlook. This makes them un- This allowed many countries around the rate bonds. willing to buy equities and many corporate world, especially in Asia, to rely on an export- bonds, unless prices are at levels that look Structural Change Benefits Some driven economic development. The consumer extremely low based on conventional valua- booms have now collapsed and the financial Ultimately, there can be winners as well as tion measures. The result is that financial system is highly unlikely to be rebuilt in a way losers from this structural change. Measures markets may reach very low levels several that reignites that former economic model. in China to boost infrastructure spending and times during the course of 2009. In between, Not only will the shopping mall culture have sustain growth in local consumer spending there can be significant rallies, as investors to change in many rich countries, but the DUHRQDYHU\ODUJHVFDOH7KH\VKRXOGEHQHƟW buy at the lows. But such rallies are likely to export orientation of many lower-income both domestic companies and firms world- be short-lived. nations will also have to be switched toward wide that have a presence in this market, A sustainable recovery seems unlikely local markets. The world is likely to become which could become the largest retail pool until there is a clearer outlook for both bank much more multipolar. globally in little more than a decade. recapitalization and for the shift of global In the US, the gap caused by weaker retail demand to a multipolar future. This greater Uncertain Times Ahead spending is gradually likely to be partially clarity is likely to take a long time to emerge. These marked changes in global economic filled by government initiatives. For exam- Until it does, markets are likely to remain structure create additional trauma and un- ple, President Obama’s health care reforms, extremely volatile. <

Credit Suisse Bulletin 2/09 54 Economy Africa Africa Is No Longer Immune From The Global Crisis For much of the past year, fast-growing African economies were able to watch the ƟQDQFLDOWXUPRLOXQIROGIURPDGLVWDQFHDQG$IULFDQEDQNVVHHPHGODUJHO\LQVXODWHG from the subprime crisis that had engulfed most Western banks. In the last few months, however, the situation has changed drastically.

Text: Eric Güller and Robert Ruttmann, Equity Research Europe, Zurich

African banks had until recently seemed Not all that long ago, the world’s image of substantially lower inflation rates compared largely insulated from the subprime crisis en- Africa consisted largely of severe poverty, to the ’90s, better fiscal and balance of gulfing most Western banks, since they typi- human rights violations and pandemic health payment positions and lower foreign debt cally retain loans on their balance sheets and crises. For their part, many investors viewed levels. In addition, political stability across hold few of the mortgage-based assets that the continent less as an emerging market the continent has improved as well. While have brought the Western financial system than as one being submerged in an abyss of there were only four democracies in Africa to its knees. What is more, during the first economic stagnation. In recent times, how- 25 years ago – Botswana, Senegal, Zimba- half of 2008, Africa’s commodity exporters ever, there has been a remarkable shift away bwe and Mauritius – today, 24 of a total were thriving on record-high prices for raw from these perceptions. 53 states are run by governments elected in materials, as demand from China and India Since 2004, Africa has achieved real multiparty polls. seemed nearly insatiable. And even as talk annual growth of over 6 percent against Stock Market Creation of a recession swelled in the US and EU the world’s average of a mere 4.2 percent. in the summer of 2008, African economies Of course, strong commodity prices have Indeed, the combination of commodity wealth, seemed a long way from the center of the played an integral role in the more recent economic reforms and improved political storm. acceleration of African economic growth. stability across the continent has in recent This has changed in the past few months. The continent is endowed with 10 percent of years begun to challenge the conventional The gravity of the financial crisis has spread the world’s proven oil reserves and 8 percent view of Africa as a war-torn, poverty-stricken from Western banks to emerging markets, of its gas reserves, and holds 54 percent crisis region undeserving of investments. currencies and credit markets – and Africa of its gold reserves. It also has a wealth of Perhaps the strongest testimony to the con- has not been spared. As world trade contracts, other precious metals, industrial metals and tinent’s effort to become a full participant so, too, does the demand for the continent’s diamonds in its ground !VHHƟJXUH . South in the global economy is the wave of stock oil and minerals, inevitably causing corporate Africa, for example, possesses 80 percent markets set up across it over the past two profits of African firms to suffer as well. The of the world’s platinum reserves. decades. question is not whether the global slowdown But the continent’s recent growth trend This growth has some investors looking to will affect the continent, but whether it can has been fuelled by more than just its com- the many local economies to provide the next be contained so that it does not jeopardize modity wealth. Many African countries have generation of emerging markets. At the same the recent economic and political progress also been helped by better macroeconomic time, the 2008 global sell-off exposed the Africa has made. management, the product of which has been liquidity constraints of many smaller African

Bulletin 2/09 Credit Suisse Africa Economy 55

markets. For example, trading volumes on ity-related investments. But the financial Shrinking Export Markets 1 the Ghanaian stock market came practically crisis has led investors in general to reduce Africa’s largest export markets are likely to shrink in 2009. Source: IMF, Credit Suisse to a standstill in 2008, making it almost im- risk and demand higher returns than in recent possible for stockholders to find buyers when years, when money was cheap and liquid-

Asia markets floundered. This lack of liquidity has ity abundant. In this context, a cutback in 16% of Africa’s exports left many smaller African exchanges still foreign direct investment could cause many Japan 3% of Africa’s exports trading at significant premium valuations rel- African infrastructure schemes to be delayed, US ative to other emerging markets, which in as the financial crisis continues to sap inves- 24% of Africa’s exports turn makes them unattractive to investors tor appetite for exotic investments. EU 33% of Africa’s exports in the current environment. Despite these Should this occur, the consequences

–7% –6% –5% –4% –3% –2% –1% 0% constraints, however, the fact that the con- could seriously affect growth and poverty Import volume growth rates 2009 in % tinent today boasts some 19 stock exchanges reduction goals on the continent. And if cut- suggests that it has opened its doors to in- backs in capital inflows spread to official ternational business and is slowly joining development assistance (such as the 40 bil- the world economy. lion dollars promised by the US over the next 2 Slowdown Expected in 2009 five years for the fight against HIV/AIDS), African gross domestic product growth is set Two Threats May Hamper Growth to slow in 2009, before picking up in 2010. the lives of hundreds of millions of Africans, Source: IMF, Credit Suisse But its growing interdependence with the including two million receiving treatment for world economy has also meant that African AIDS, may be jeopardized. 7% economic growth is more vulnerable than Given these two threats to African growth 6% ever to the current global economic slow- prospects, it is not a question of whether 5% down. In this context, the global financial the continent will be hit by the turbulence 4% crisis threatens the progress the continent on the global financial market, but rather 3% has made in recent years on two different how badly it will be affected. And although 2% fronts. First, the slowing global economy and Africa is expected to record a 3.3 percent 1% the contraction of trade will likely also shrink growth rate in 2009 (> see figure 2) compared 0% the foreign demand for Africa’s main com- to negative output in the advanced economies, modities that had fuelled the recent boom. the relatively lower growth there represents 00 01 02 03 04 05 06 07 08 09 10 The first figure on this page, which shows a sharp slowdown from the momentum the Africa World Africa’s largest export markets (the EU, US, continent had been enjoying in recent years. Asia and Japan), indicates that these mar- This slower growth in turn is likely to have a kets are registering significant cutbacks in significant impact on African economies, 3 Africa’s Commodity Reserves their import growth rates. Furthermore, the especially since most of them have a popu- More than 80 percent of the world’s platinum sharp fall in commodity prices is also taking lation growth of 3 percent, which means in reserves, and more than 50 percent of its gold its toll on African growth prospects, since effect that their per capita gross domestic reserves are located in Africa. Source: US Geological Survey, Credit Suisse nearly 60 percent of the continent’s exports product is stagnant. come from fuels, and more than 20 percent Long-Term Opportunities Are Promising Platinum reserves from metals. Cocoa production Of course, oil exporters are likely to be hit Nevertheless, for all these short-term risks, Diamond reserves hardest, with the price of their commodity African economies continue to exhibit all the Kyenite reserves down nearly 70 percent since its all-time necessary components for a sustainable Gold reserves high in July 2008. And although oil-import- growth trend on a longer-term horizon: Vermiculite reserves LQJFRXQWULHVDUHOLNHO\WREHQHƟWIURPWKH improving macroeconomic and political Chromium reserves decline in prices, many of these countries management, young populations, a need Zirconium reserves are also exporters of soft commodities such for technological catch-up, significant out- Manganese ore as cotton and coffee, the prices of which put gaps, rapid population growth and the Titanium reserves have also drastically fallen. growing ability to access capital markets to Phosphate rock The second major threat to Africa posed finance sustainable, private, sector-led eco- Oil production by the current global financial crisis is the nomic growth. Arable land probable reduction of the capital flows that Thus, although the global crisis will cer- Oil reserves have played an important role in the conti- tainly dent Africa’s short-term growth pros- Coffee production nent’s development of late. In recent years, pects, the structural reforms many of the Natural gas reserves African countries have seen a surge in for- continent’s governments have undertaken in

0% 20% 40% 60% 80% eign capital flows – foreign direct investment, recent years should enable them to deal Share of world total in % portfolio investment, remittances and aid – better than ever with the challenges of a and most are using such inflows to finance slowing global economy. In this context, the much-needed infrastructure development, long-term growth prospects of most African with the lion’s share fed into local commod- economies remain promising. <

Credit Suisse Bulletin 2/09 56 Economy Rees Poverty Needs to Be Tackled Differently

Many of the traditional approaches to poverty relief, such as foreign aid, have failed to raise the incomes or living standards of the poorest. In recent years, however, private- sector initiatives and the promotion of entrepreneurship to drive economic development have been gaining ground around the globe – with great success.

Text: Matthew Rees

Debates about how to reduce poverty in private sector to drive economic development which is an invaluable collection of data that developing nations frequently descend into has been growing in popularity. ranks the business climates of countries mind-numbing discussions about the relative throughout the world, documents that over Radically Changed Mindsets merits of foreign aid. I’ve done my share of the past five years, 115 (mostly developing) intellectual wrestling with this issue, though “There’s clearly something happening that’s countries have implemented 193 different my “aha” moment came not from reading a gaining steam,” says Bruce McNamer, pres- reforms aimed at fostering startups. Last World Bank report or listening to a Jeffrey ident and CEO of Washington, DC-based year, for example, Yemen implemented a Sachs speech, but rather from listening to a TechnoServe, an organization focused on plethora of noteworthy changes, including a friend’s short story, over a decade ago. promoting entrepreneurship and business reduction in its minimum capital requirement This well-meaning chap had gone to work growth in developing countries. The group for new businesses from 15,225 US dollars – at an investment bank at age 22, but when reflects the heightened activity in this space. the second highest in the world – to zero. disillusionment set in after a few years, he de- It has tripled in size over the past five years It’s not just government officials who cided to “do some good for the world.” This thanks to surging donations (from the likes understand the opportunity presented by the led him to a job with a charitable organization of the Gates Foundation) and growing de- private sector. A recent World Bank study of in Latin America, where he was digging mand for its expertise. 60,000 poor people throughout the world ditches and building latrines. The work, while A number of catalysts are driving the posed the question of what they thought not glamorous and paying next to nothing, business as development model. Most funda- would be the most effective way to escape was nonetheless honorable. mental, many of the traditional approaches poverty. “The answers were unequivocal,” But my friend came up feeling empty. to poverty relief, which have focused on every- the study’s authors wrote, poor people “pin “I gradually realized,” he told me, “that I could thing except the development of a vibrant their hopes on income from their own busi- be of greater long-term help to the people private sector, have failed to raise incomes ness or wages earned in employment.” in these villages through my work as an or living standards. The shortcomings have Nonprofit Groups Combat Poverty investment banker than I could as a manual been a stark contrast to a model that has laborer.” He went on to explain that what succeeded – microfinance – and the attention Pioneering nonprofit groups have also these countries really needed was access it has received (such as a Nobel Prize for helped to legitimize the idea of using the to capital, which would promote investment microfinance pioneer Muhammad Yunus) private sector to counter poverty. One is and economic growth. Traditional invest- has helped to popularize the private-sector Endeavor, which operates in nine countries. ment banking activities – such as privatizing approaches to poverty relief. It focuses on identifying high-impact en- state-owned industries, underwriting IPOs According to Paul Kagame, president of trepreneurs and then pairs them with sea- or syndicating debt – were going to inject Rwanda, “It is becoming increasingly clear soned experts who can offer hands-on ad- new capital and new efficiencies into these that entrepreneurship is the most sure way vice and help to open doors for capital. One economies. And this, he assured me, would of development, because entrepreneurship Argentine company it supported and helped help to spark expanded employment and unlocks people’s minds and allows innovation to grow, MercadoLibre, is now traded on the higher living standards. My friend is no longer to take place ... I think this is simply the back- NASDAQ. The Endeavor model is “the best in investment banking, but his idea endures. bone of everything.” Kagame isn’t alone in anti-poverty program of all,” according to Indeed, in recent years the notion of address- seeing the power of entrepreneurship. The New York Times writer Thomas L. Friedman. ing poverty by harnessing the power of the World Bank’s 2009 “Doing Business” report, Another innovative group is Legatum, which

Bulletin 2/09 Credit Suisse Rees Economy 57

invests in a range of private-sector initiatives targeted at economic development – with a focus on fostering the growth of India’s microfinance sector. The organization’s leadership has worked to bolster the intellectual underpinnings of its approach, launching a research organization that studies and promotes the principles contributing to global prosperity. It also created the Legatum Center for Development and Entrepreneur- ship at the Massachusetts Institute of Tech- nology (MIT) to promote the creation of technology-based for-profit businesses that will serve developing nations. The oldest occupant of this economic development niche is TechnoServe, which was founded in 1968 and today operates in 20 countries. Its efforts are geared toward developing small and medium-sized businesses that benefit the poor by generating jobs and markets for their products and services. It also focuses on developing entre- Organizations Making a Difference Columbian preneurs and working to create a climate coffee farmers such as Leocadio Abello Lopez have supportive of business development. worked with TechnoServe to create a cooperative focused on the export of high-quality, sustainably Staff Composed of Managers produced specialty coffee, for which there is growing A distinguishing feature of these organiza- global demand. tions is the professional backgrounds of their leaders. Unlike many economic development “experts,” they tend not to be PhD econo- crease in revenues. In Mozambique, the group The ability to turn armed conflict into peace- mists with years of experience in academia has helped to revitalize the country’s poultry ful commerce is but one example of the trans- or with nonprofit groups. Legatum’s New industry, and has helped to increase the in- formative work undertaken by groups like Zealand-born founder, for example, spent come of 1,000 farmers by 500 dollars a year TechnoServe, Endeavor and Legatum. But in 20 years successfully investing in a range (in a country where the average annual in- the midst of a global economic slowdown that of industries, across a range of countries. come in rural areas is a mere 12 0 dollars). has plunged an additional 10 0 million people And TechnoServe is filled with former agri- And in a number of countries, including into poverty over the past 18 months, their business executives and management con- Tanzania and Rwanda, TechnoServe has efforts could face resistance. The incentives sultants. The organization has also created helped coffee farmers to seize opportunities found in the private sector, say some, are a program for volunteers – many of whom to produce quality coffee that will fetch high what unleashed the abuses that have given come from McKinsey (a one-time employer prices from major buyers like Starbucks. “In rise to the financial crisis. of McNamer, the CEO of TechnoServe) – to 2007,” says TechnoServe, “it worked with True or not, the current economic turmoil work for three to six months helping indi- more than 700 businesses, which employed and the toll it is taking on developing coun- vidual companies to grow their business. more than 17,000 people, bought products tries only underscores the need for fresh These pedigrees are reflected in how from more than 250,000 small-scale suppli- thinking about how to tackle poverty. Build- these groups operate. TechnoServe, for in- ers and generated almost 150 million dollars ing on the energies and efficiencies of the stance, sponsors competitions in a number in revenue. Altogether, it helped to improve private sector is a good place to start. As of countries for the best business plans. the lives of nearly 1. 4 million people.” Legatum points out: “Only the creation of Those judged the most promising are paired Behind this data are stories of progress, prosperity can truly make poverty history. with trainers, private-sector mentors and prosperity and a better future. TechnoServe Aid cannot. Good intentions cannot. Entre- seed capital. This is similar to what venture recounts a story of its founder, Ed Bullard, preneurship can.” < capitalists do – the fundamental difference visiting a community in northern Nicaragua’s being that TechnoServe doesn’t take an Jinotega province, which was emerging from Matthew Rees is a former White House equity stake in the companies. the country’s civil war. The organization had speechwriter and In Guatemala, TechnoServe has assisted helped soldiers become coffee farmers, and the founder of Geono- a company focused on the production and they showed their thanks by presenting Bul- mica (www.geono- mica.com), a writing AK 47 sale of organic mushrooms, which has en- lard with an - rifle mounted on a plaque and consulting firm. abled the company to achieve a 10 0 percent that read, “Ayer la Guerra. Hoy las Empresas.” increase in production and a 40 percent in- (Yesterday the war. Today enterprise.)

Credit Suisse Bulletin 2/09 58 Economy Media Structural Crisis in Europe’s Media Comes to a Head Though in past years the media landscape has been shaped above all by structural FKDQJHOLQNHGWRGLJLWDOL]DWLRQF\FOLFDOLQƠXHQFHVKDYHRQFHDJDLQEHHQSOD\LQJ a bigger role of late. This is in turn increasing the pressure for structural change, KRZHYHU8OWLPDWHO\WKHFRQVXPHULVVHWWREHWKHELJJHVWEHQHƟFLDU\

Text: Ulrich Kaiser, Equity Research Europe, Zurich

Faced with the need to address the chal- constitute up to 90 percent of their the media landscape mate- lenges of the new digital age, the media revenues. Consequently, they are rialized in full, this does landscape has been dominated by structural highly dependent on economic not apply to corporate earn- change since the start of this decade. With growth. In the case of pay-TV, the 2 ings levels. Indeed we now the onset of the global recession, however, rate of dependency is considerably lower; know that media companies on the whole fail cyclical influences have again been playing meanwhile, general and specialist book to derive any profits from the Internet. Some a bigger role. That comes as no surprise publishing are hardly reliant on advertising subsectors, such as yellow pages, were given the sector’s high dependence on cor- spend !VHHƟJXUH . actually faced with a threat to their existing porate and consumer demand. The latter business model. In the best-case scenario, The Digital Challenge generates about 20 percent of media reve- the extensive investments produced enough nues, with corporate demand responsible The media industry underwent a major expan- of a return to ensure that the decline in exist- for roughly 70 percent. This lion’s share is sion of business in the 19 8 0s as well as ing business caused by the Internet was off- essentially explained by corporate advertis- in the first half of the 19 9 0s. Faced with set by online activities. This is true for spe- ing budgets. Both components of demand the digital challenge (led by the Internet) in cialist publishing, for example, which offers are closely related to disposable income, the run-up to the millennium, many market its marketable content partly as hardback or hence their high dependence on the rate of observers believed that growth would con- simply online in response to the change in economic growth. tinue – if not actually accelerate. As in the customer requirements. In terms of the various subsectors, the US, it was hoped that the Internet would Increased Mobility a Disadvantage relationship between consumer and corpo- produce lasting changes in the media land- rate demand is shifting – in scape and that media com- To claim that the Internet alone is responsible some cases substantially. panies would benefit ac- for structural change in the media world For companies in the adver- cordingly. Virtually every would be unfair. The change in living and tising, marketing, yellow media firm devised an working conditions is another important pages, newspaper and mag- Internet strategy, one in factor. To begin with, this shift means that azine publishing – but also 1 which it invested exten- people are spending less time at home, and television (in particular commercial TV) sively and implemented and expanded over increased mobility makes consumption of subsectors – advertising receipts often the years. While the forecasted change in traditional media like daily newspapers and

Bulletin 2/09 Credit Suisse Media Economy 59

television more difficult – to some extent even ing, are experiencing a similar fate to that Advertising Expense and GDP Growth impossible. Second, people are availing them- facing much of the print media. For private 1 Spending on advertising is closely linked to selves of the new opportunities to consume channels, the problem is that their target economic growth. Source: Credit Suisse, ZenithOptimedia media – from the free newspapers beloved audience in most cases consists of people of commuters in particular through to infor- under 50 years of age. This is reflected in Year-on-year growth mation retrieval via digital, portable devices their programming, and accordingly their such as mobile phones and, more recently, frequent commercial breaks are tailored to 15% netbooks. Both have implications the needs of this target audience. 10% for subsectors like yellow pages, For some years, however, it has 5% magazines and in particular news- been clear that the younger 0% papers. target audience in particular is –5% Those parts of the print media spending more time in front of 50 58 66 74 82 90 98 06 10E focused on retail consumers are the PC than the TV. The variety Normal gross domestic 4 product (GDP) growth affected by the digital challenge of computer games (including on- Growth in advertising expenditure in different ways and accordingly are ap- line), downloading of music and movies, proaching it from different angles. They are as well as surfing and chat rooms on the primarily affected by the fact that fading con- Internet have had a clear impact on the view- Media Stocks Under Increasing sumer interest is resulting in a less attractive ing figures of private TV broadcasters – a fact 2 Pressure proposition for advertising customers. Yellow that has not gone unnoticed by members of The Media index significantly under- pages, as well as newspapers and mag- the advertising industry. They are therefore performed the broad MSCI index between azines, are either fully (yellow pages) or reducing their television advertising budgets 2000 and 2007. Source: Datastream, Credit Suisse largely (newspapers, magazines, commercial and putting some of that money into online television) financed by advertising receipts. activities, with the result that they get more Indexed

If their circulation or audience figures fall, out of their advertising budgets since their 140 this is accompanied by falling advertising partners are losing pricing power or even 120 revenues. Increasingly, newspapers are also finding that they don’t have any at all. 100 bemoaning the loss of small ads to online Improvement in Infrastructure 80 portals and free newspapers. This is having 60 a very serious effect on regional newspapers Today’s retail consumer faces a varied digital 40 especially. Online portals are more attractive media offering, which is becoming increas- 20 and effective for small ads like those for cars ingly integrated. The biggest hurdle continues 0 and real estate. Newspapers cannot offset to be the many locations with an inadequate 00 02 04 06 08 this loss of revenue with an Internet technology infrastructure. As MSCI Europe presence. The fact is, consumers soon as there is universal MSCI Europe Media index Relative performance of Media vs. are reluctant to pay money to obtain availability of high-perfor- MSCI Europe information online. Yellow pages mance broadband for the publishers also need to bear this distribution of television and in mind when they see their future Internet content, but also Earnings Forecasts Too Optimistic lying in putting more of their con- data transfer, ongoing struc- 3 Consensus estimates for 2009 and 2010 have tent online, or going online for the tural change in the media been revised. Source: Datastream, Credit Suisse first time. For newspapers with a industry will intensify again. small print run or those with only a 5 This will primarily involve Euros regional presence, the process of con- television broadcasters, solidation will therefore continue. but also include suppliers 9.0 Price increases offer only a partial of content such as music 8.0 solution, since they often lead to and movies. By then at the 7.0 canceled subscriptions. Charging latest, triple play (telephone, 6.0 a higher price for premium con- Internet and television from a 5.0 tent is a possible option, but in our single source) will finally triumph 4.0 view is likely to be the preserve of pan- in the household market – to 3.0 6 regional newspapers, generally speaking, the consumer’s benefit. Consumers 2.0 as it tends to lead toward a further thinning will benefit from the competitive battle 03 04 0506 07 08 of readership. already under way, as reflected in increas- 2005 2006 2007 2008 2009 2010 ingly keenly priced and/or extensive offer- Even Television Is Suffering ings. Telecom service providers and cable Television broadcasters – not the public ser- network providers in particular will be battling vice broadcasters, but the private channels – it out. Customers will ultimately be deciding

Photos: Mathias Hofstetter | Provided by Apple who get most of their money from advertis- on the basis of the attractiveness of con- >

Credit Suisse Bulletin 2/09 60 Economy Media

tent – not just the cost. Besides telephoning operating margins will decline. We therefore and using the Internet, customers will be believe the current valuation premium shown able to watch television, including by the MSCI Media index over MSCI TV on demand. In addition to a Europe will continue to fade as soon free videotheque, they can also as the economic environment stabi- have access to video on demand. lizes. The fact remains that the media Customers are therefore be- sector is perceived to be a relatively coming increasingly independent safe haven amid the current envi- of standard programming, and ronment by virtue of its earnings even more difficult for advertisers stability combined with its high divi- to be reached. dend yields. It has now been almost 10 years Consumer Is the Big Winner since the apogee of the dot-com bubble. During this period, the 7 Within the media sector, structural media sector awoke from its slumber with change will have mixed effects for the vari- hardly a single firm failing to be mentioned ous subsectors. The result will be in the same breath as the benefits of the In- negative for the yellow pages, televi- ternet and supposed growth potential. This sion and general publishing, and neu- growth potential became priced into stocks, tral for specialist book publishing and driving valuations skyward before it all turned conglomerates. Ultimately, the only sour with the bursting of the speculative bub- winner will be the consumer. < ble. The media sector has been experiencing a period of correction ever since.

Process of Adjustment Continues

While analysts continue to devote their attention to identifying which companies are benefiting and which are suffer- 9 ing from the digital revolution, the stock market is constantly pricing in the latest findings. The 8 results are sobering, since despite collapsed equity prices in the wake of the bursting of the speculative bubble, the adjustment process is continuing. The MSCI Media index underperformed the MSCI Europe between 2000 and 2007 !VHHƟJXUH . The realization that actually there are no pure Internet stocks in Europe is also likely to have played a part in this. Only in 2008 was there a reversal of the trend – in expectation, finally, of higher 1 Financial Times, daily newspaper earnings !VHHƟJXUH . 2 Yellow pages What should we expect from media firms 3 Laptop computer and their stock price performance in the 4 Wi-Fi radio short to medium term? For now – meaning 5 Annabelle, magazine 6 20 Minuten, free newspaper until at least the middle of the year – we reck- 7 iPhone RQWKHQHZVƠRZZLOOUHPDLQQHJDWLYH7KLVLV 8 TV remote indicated by forecasts for the current period 9 E-book 10 SonntagsZeitung, Sunday newspaper as issued by companies at their 2008 results presentations. Some subsectors are in a position wholly or partly to offset weaker demand – that is, lower revenues – through cost savings, and thereby to keep their operating margins, net income and dividends relatively stable. This applies in particular to specialist book publishing. Our view, however, is that inadequate revenue growth cannot be offset

by cost savings in the long run, and that 10 Apple | LogitechHofstetterby Mathias | Sony | Provided Photos:

Bulletin 2/09 Credit Suisse Good to Know Economy 61 Good to Know Definitions and Book Reviews From the Business World

Quiet Period [ Limited period writer can do is wait and see Leading Quietly during which companies cannot whether or not the purchaser de- disclose information ]: Contrary to cides to exercise the option. So Leading Quietly: An Unorthodox Guide what you might think, a Ɩ quiet perhaps an option writer does have To Doing the Right Thing period has nothing to do with re- something in common with a Joseph L. Badaracco, Jr. laxing from the demands of daily novelist after all: Once his work Harvard Business School Press, 2002 working life, nor is it related to the leaves his possession, he has no Hardcover latest buzzwords such as work-life further control over its destiny. 224 pages EDODQFH7KHWHUPLVXVHGLQƟQDQ- Hidden Reserves [ Reserves ISBN-13: 9781578514878 cial communication and means a not shown on a balance sheet ]: period during which a company Anyone can have a cache of WHPSRUDULO\KDOWVLWVQHZVƠRZWR Ɩ hidden reserves – perhaps a This philosophical essay about leadership is not about the kind the capital markets and general store of canned foods in the cellar of leader who makes it onto the front pages of newspapers or into public. This occurs immediately pri- or even gold bars hoarded under history books. Instead, it is about average people who labor in or to certain major events, often WKHLUPDWWUHVV,QƟQDQFLDODFFRXQW- middle- to lower-level bureaucracies, who do the work that keeps GXULQJWKHSHULRGEHIRUHWKHRIƟFLDO ing, however, hidden reserves SXEOLFDWLRQRIƟQDQFLDOUHVXOWV are either undervalued assets or their organizations moving forward. Author Joseph L. Badaracco, ZKHQFRQƟGHQWLDOLQIRUPDWLRQDYDLO- overvalued liabilities on the com- Jr., calls these people “quiet leaders.” The decisions they make able within the company cannot pany’s balance sheet. For example, may not appear earthshaking, but they still require taking many be disclosed. if the value of property, plant and complex factors into account. Badaracco illustrates the kinds of A quiet period is thus a period dur- equipment shown on the balance ethical and moral dilemmas quiet leaders face with guidelines from ing which complete confidentiality sheet is below their actual market is imposed to ensure that no one YDOXHWKHFRPSDQ\ŒVƟQDQFHV case studies. However, many of the stories he presents are so can benefit from information that do not look as good as they really commonplace, and the lessons he draws so self-evident, that the is not yet common knowledge. A are. These reserves are said to book is hardly the “unorthodox guide” it wishes to be. getAbstract quiet period is often declared be- be “hidden,” as even though the recommends this to mid- and low-level managers who seek an fore major reorganizations, such as company is well aware of the differ- mergers of several companies or ence between the book value alternative to traditional ideas about heroic leadership. © getAbstract VWRFNPDUNHWƠRWDWLRQVWRHQVXUH and the market value, this is not in- equal treatment of private and dicated in the published accounts. institutional investors. It is similar This apparently misleading ac- Stop Pushing Me Around! to the period during which author- counting practice is perfectly legal, LWLHVFRQGXFWDQRIƟFLDOLQYHVWLJD- and is even considered desirable, Stop Pushing Me Around! A Workplace Guide tion: It is a well-known fact that as it provides a way of building up For the Timid, Shy and Less Assertive information is not disclosed during “unseen” funds to protect creditors. Ilise Benun this phase. But beware: If you fail to notify Career Press, 2006 Option Writer [ Seller of an the tax authorities of your personal Paperback o ption contract ]: This is another hoard of gold bars, you will not 220 pages ƟQDQFLDOPDUNHWWHUPWKDWLVQRW get very far by arguing that you had ISBN-13: 9781564148827 immediately obvious to the uniniti- simply been building up hidden ated. The Ɩ option writer is not a reserves! tst Ilise Benun’s book starts out provocatively. She suggests that writer in the classic sense who stays up all night penning a novel, you can change your disposition from shy to assertive by concen- but is quite simply the seller or trating on your actions instead of your feelings. She provides grantor of an option contract. And lots of exercises to help you be more aware of your emotional the background to the term is reactions and habits. She also offers advice on how to overcome perfectly plausible: On the basis of a forecast, for instance the shyness in a multitude of situations such as in sales presenta- e xpected performance of a share tions, networking events, job interviews and general office run-ins. price, an option writer decides Unfortunately, the book lacks depth in some areas. For instance, to sell an entitlement to the share certainly there is a lot to be said for telling stories in your work life, and places this contract on the market. The option writer has to but if you’re shy, spinning a tale confidently seems like a mas- consider carefully whether the sive challenge. However, her core advice on how to stretch your transaction is likely to prove lucra- abilities beyond your “comfort zone” is solid and actionable. For that tive. After all, if the writer’s ex- achievement, getAbstract recommends her useful guide for making pectation for the share price is contacts in business scenarios, despite your qualms. © getAbstract wrong, the transaction can prove very expensive. Once the option contract has been sold, all the © getAbstract. For five-page summaries of these books, visit www.getabstract.com.

Credit Suisse Bulletin 2/09 62 Leader Hernando de Soto Property Rights Eradicate Poverty The Peruvian economist Hernando de Soto is a staunch promoter of legal reforms aimed at empowering the world’s most vulnerable populations, who cannot prove what they own, and thus cannot secure credit and capital, by granting them access to property rights. Countries in which such people are in the majority cannot grow, de Soto maintains.

Interview: Dorothée Enskog

Bulletin: Why are property rights crucial when it comes Although the relevant laws are clearly in place, they are not to eradicating poverty? accessible to many people. And to be able to grow, you need to Hernando de Soto: They are important because they document be able to identify yourself in the marketplace, and thus gain where things are located and to whom they belong. We share access to credit and capital. our economic world with over six billion other people, which means Have you seen any improvement over the past decades? we do business with billions of people we don’t know. Essentially, Generally speaking things have gotten better during the last the only documents that allow you to identify your counterparties 20 years. Peru, which has adopted a good amount of reforms, and to pool various resources are property titles. That is how has been growing at about 10 percent for a few years now. we get to know each other. The system breaks down without clari- The country is doing much better, considering that a lot of its ty as to ownership. growth is due to construction, mining and exports of agro- How many people do you estimate are unable to claim industrial goods. These sectors would not have been able to their property as assets? grow without solid property rights to land and mines. But there A little over two billion people participate in the legitimate is still an enormous amount of work to be done. You not only globalized economy: the citizens of North America and Europe, need property rights as such, they must also be recorded, and small elites in developing countries and former Soviet written up as rules, and implemented in a very specific manner. Socialist Republics. The remaining four billion live outside the As a consequence, countries require good legal systems. system, in an extra-legal economy, if you will, in the sense What do you mean by good legal systems? that they cannot prove what they own, where they are employed, Property titles must comprise various elements. They must first or what businesses they run. of all be fungible. Each transaction involving the title – buying, When and why did you begin championing property selling or leasing – must be recorded. They must also be homoge- rights for the poor? nous – available in both urban and rural areas. The title must When I returned to my native country of Peru as a young adult, not only protect property or land from a third party, it must also be I was surprised by the extent to which developing countries had capable of use as collateral. Why would someone lend you money, turned inward. I noticed how difficult it was to obtain documents after all, if he can’t actually claim it if and when you fail to reim- from the authorities: For instance, it took me three years just burse the loan? The tendency has been to register only rights to to get a street number for my house. I started wondering if this land. But that’s not enough. type of legal transaction was even more difficult for the poor, What else is crucial to building an inclusive and modern so I hired a professor and some students to set up a small compa- market economy? ny in the middle of a slum in Lima. Their objective was to create Many elements can be improved if you define the word a legal shirt-manufacturing business with two sewing machines, property to include businesses as well. If you create property open eight hours a day. It took them 279 days to obtain the rights to businesses, they must be able to attract investors permit to operate. In Egypt, where a similar trial was carried out, by issuing shares. Giving investors control over equity is like

it took 549 days to set up a bakery. giving them a right to the components of a business. > Ly Gee Photo:

Bulletin 2/09 Credit Suisse

Hernando de Soto Leader 65

Having spent most of his youth in Switzerland, Are governments ready to listen and implement the Hernando de Soto returned to his home in Peru as advice ILD gives them? an adult. His encounter with Peru’s complicated The people who are keen to call us in are politicians with a man- OHJDOV\VWHPDQGLQHIƟFLHQWEXUHDXFUDF\FDPHDV date to change the situation in their country. They are sometimes a total surprise, and spurred him to set up the shocked by our diagnosis, but in a pleasant way, because our Instituto Libertad y Democracia (ILD). The Lima- diagnosis explains why things don’t work in their country. If we are based think tank is committed to moving the assets able to demonstrate that their country cannot prosper and operate of the poor from the extra-legal economy into the properly without the rule of law, although it’s a shock for them globalized market economy by ensuring that the to hear, they also welcome the news, since it means there is property rights already in place in most of the world a solution to their problems. Those who benefit from the red tape actually function as a means to economic and of the status quo – very small public and private bureaucracies – social empowerment. According to de Soto, the don’t always like us too much. problem is the manner in which these existing prop- What would you say is ILD’s greatest achievement? erty rights are actually implemented in developing It’s probably simply the fact that we survived, because we chal- countries. In addition to being the president of lenge the status quo. We go against traditional views of devel- ILD, de Soto is currently writing a book about the opment, some of which say that cultural differences are respon- causes of the current recession. “This recession isn’t sible for developing countries lagging behind. People around a bubble bursting,” he notes, “but a legal failure.” the globe are actually much more similar than we think. Look at successful immigrants worldwide. Culture and race are not impediments to modernization: The impediments are largely the lack of appropriate institutions. Businesses must also be granted limited liability. If an owner can be sure that an investment in his business will not detract from his investments elsewhere, he will do much better. “We challenge the status quo. Asset shielding – earmarking capital exclusively for a business – is also necessary: If the business goes into debt, the owner should We go against traditional views not be able to run away with the capital. of development.” Businesses must also be organized internally, with a clear hierarchy. By this I mean that a CEO, a CFO and employee rights as well as other elements are necessary. ILD has worked in many different countries. Which ones would A survey in Latin America found that only 10 percent of all have made the greatest progress over the past decade? businesses meet all of the above-mentioned criteria. The situation Peru and El Salvador have done pretty well, as have Egypt and is probably similar in most developing countries. Tanzania. In Peru, the value of homes in urban areas has increased You are the president and founder of ILD (Instituto Libertad tremendously, which has in turn boosted the value of credits and y Democracia) in Peru, which promotes the agenda you describe. investments in the cities, and as a result brought peace to them. Could you tell us more about ILD? Thailand has set up an organization based on ILD’s work methods, It was set up in 19 8 4 as a foundation to do research. It has and it looks pretty successful. Many, such as Russia and the since evolved from think tank to action tank. Shortly after our first Philippines, have taken up our formulas without ever having called publications, we started getting calls from the Peruvian govern- us in and they are making good progress. ment, followed by other governments. We investigate the size of It seems that the lack of property rights is more common countries’ extra-legal economy and make plans for reforms. in rural areas. What are the implications of this? We have worked in 20 countries in Latin America, Africa, the Before the world started concentrating on the current recession, Middle East, the former Soviet Union and Central Asia. We’ve a major issue on the agenda was the food shortage in some parts even been called into developed countries, such as the US and of the world. Most of the world’s food is produced on 1.6 billion Canada. In the US, for instance, more than 30 million people hectares located in Europe, North America and Australia. Up to do not have fungible title to their land – mainly on the Mexican bor- 2.6 billion hectares of land could, however, be used to produce food der, in the inner cities and among native populations. We didn’t in Africa and Latin America. There is plenty of land to produce take up these mandates, however, as they would have been too from, but one characteristic of all such agricultural land is its lack complex for us. of clear property titles: It’s unclear to whom it belongs. This How does ILD operate? means in turn no investment, since the land cannot function as We typically get a request for our expertise from the country’s collateral. The world won’t be able to deal with the food shortage head of state. ILD then sends in a small team, and recruits much until this issue has been resolved. larger teams locally. We first do a diagnosis, telling the head of Isn’t there a danger that foreign capital would buy up all state how big the country’s extra-legal economy is and what char- of this African and Latin American land once property rights have acteristics it has, before we design reforms. This is followed by been established, because it’s so cheap? an implementation phase. As we advance in the project, there is No one is safe from the power of the wealthiest. Anyone who a tendency on the part of them to push us out, which is a healthy is richer than you are can buy you out, whether they are local or

Photo: Gee Ly Gee Photo: sign. The local teams then take over our work. foreign. The question is, how can you obtain the best deal – >

Credit Suisse Bulletin 2/09 66 Leader Hernando de Soto

with or without property ownership? I can assure you that if you Is it realistic to track all of these toxic assets? are not the owner of your assets, the richest will buy you out Why not ? We register everything, from births and cars to bank more cheaply than if you did enjoy ownership. After the tsunami in accounts. There is no need for a global register of toxic assets, Indonesia, for instance, the rich went in and took land without but some uniformity in their reporting is key. An economy that paying anything, since there were no property titles attached doesn’t register its components properly is called a shadow to any of the land involved. The rich also “took over” New Orleans economy, the extra-legal economy. Such economies don’t work after Hurricane Katrina. The difference is that they at least had because there is no reliable information available. to pay for this land, since the poor had titles to their assets. +RZGR\RXYLHZPLFURƟQDQFHLQLWLDWLYHV" But I wouldn’t worry too much about agricultural land in Africa A lot of people have benefited from microcredit, and that is good. or Latin America being sold out once property titles are in place. It reaches peoples that traditional banking could not get to. Most people don’t move to the cities because they have been Is it the final solution? No, but it is an extremely good beginning. bought out, but rather because they don’t want to be farmers, Microcredits won’t defeat the recession, build a nuclear plant or and they will sell their land if they can. They are migrating by the boost development. That’s where macrocredits become necessary. millions to cities in China and Latin America because most of Could you tell us more about the work you carried out them prefer to live where there is medical care, and where they for the United Nations’ Commission on Legal Empowerment can choose their professions. In the rural sector you can only be of the Poor, which you co-chaired with former US Secretary a farmer, period … and a poor one at that if you have no access of State Madeleine Albright from 2005 to 2008? to the credit and capital that property makes more accessible. Article 17 of the United Nations Universal Declaration of Human Intellectuals in the developed world have a far too unrealistic and Rights states that “everyone has the right to property alone as well romantic view of the countryside in poor countries. as in association with others. No one shall be arbitrarily deprived of his property.” The commission gave life to this article by fleshing out the concept and putting it into a language acceptable to the “I would not worry too much about entire UN community. When the term “property rights” is used today, many people believe it to represent a right-wing agenda. agricultural land being sold out We tried to think of other words and finally called it “legal empow- once property titles are in place.” erment” rather than property rights. It isn’t as precise, but it’s a much kinder term that people will feel more sympathetic toward. When I refer to property, I mean its 19th-century connotation. Which countries still need to build up an inclusive It was property rights that destroyed the privileges of royalty market economy? and opened up the possibility of wealth for all. < All countries. It’s also a challenge in the developed world. Take the current subprime crisis as an example. The developed world has introduced an estimated 600 trillion dollars worth of derivatives into the financial markets, derivatives that are not Beyond a Dollar a Day – A Documentary recorded in a central property register. That is the reason why Meant to Provoke Debate these toxic assets cannot be taken out of the financial system. The documentary “Beyond a Dollar a Day,” produced We don’t know where these derivatives are and how many by Credit Suisse Board member David Syz, looks they are. If we had applied the same rules to derivatives as we DWKRZHQWUHSUHQHXUVKLSFDQSOD\DNH\UROHLQƟJKW- do to the registration of equities and airplanes, for example, LQJSRYHUW\([SHUWVIURPDUHDVDVGLYHUVHDVƟQDQFH we would know where they are. This has led to a global recession, SROLWLFVLQVWLWXWLRQVDQGQRQSURƟWRUJDQL]DWLRQV a lesson that should not be forgotten. JLYHWKHLUSRLQWVRIYLHZLQWKHPLQXWHƟOP You just mentioned the subprime crisis. What are “Poverty remains endemic, with more than one billion the main consequences of this crisis for the world’s poorest people living on less than a dollar a day. Aid isn’t inhabitants? enough to resolve the issue. Investing (in developing We’ll find out, as the crisis isn’t over yet. It’s not a matter of countries) is better, as it enables them to become a bubble bursting. Only about 13 trillion dollars, euros, francs competitive on a worldwide basis, in turn creating and other currencies are available in cash. The remainder is lasting jobs,” Syz said as he presented his documen- to be found in the form of property documents such as mortgages, tary before joining in a panel discussion. “Invest- mortgage-backed securities, or credit default swaps, whose ments in developing countries must not only be good volumes are much larger than the cash available. But the credi- for a company’s shareholders, but also for the host bility of such titles has been deeply affected by the ongoing country,” the Chairman of Nestlé, Peter Brabeck, subprime crisis and the attendant credit crunch. The availability QRWHVLQWKHƟOP+HUQDQGRGH6RWRZKRDOVRDS- of credit has thus tremendously contracted, affecting anyone pears in the documentary, stresses that “developing who needs a loan – all the way down to the poorest of the poor. countries above all need the trust of investors. What is the solution? How? With functioning laws, which allows to identify The toxic assets need to be taken out of the financial system as resources. That brings security to the investors. soon as possible, in order to restore trust. That would be the best $LGRUPLFURƟQDQFHLVQŒWWKHVROXWLRQ7KH\DERYH way to fight the recession. DOOQHHGPDFURƟQDQFHŏODUJHLQYHVWPHQWVŕ

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